Economy: G-20 To Meet About Continuing Financial Support
• "The Group of 20 leading nations will agree this weekend it is too early to pull the plug on emergency support for the global economy and launch a new system of checks to help rebalance world growth and prevent future crises," Reuters reports. "British finance minister Alistair Darling is hosting the third meeting of G20 finance ministers and central bankers this year in St Andrews, Scotland" today, "aiming to put flesh on the bones of agreements made at a leaders' summit in Pittsburgh in September."
• "A senior House Democrat said Thursday he would push to extend unemployment insurance benefits through all of 2010 before the end of this year, when the eligibility window for new enrollees will shut down or begin to phase out for existing beneficiaries," CongressDailyAM (subscription) reports. "The projected cost of such a program is potentially $80 billion to $85 billion, according to preliminary estimates."
• "No large financial firm should be too big to fail, said two members of the U.S. Senate Banking, Housing and Urban Affairs Committee," Bloomberg News reports. Republican Bob Corker of Tennessee and Democrat Mark Warner of Virginia "are sponsoring legislation to give the Federal Deposit Insurance Corp. the authority to force large bank holding companies into receivership. Any firm that benefits from a government-funded orderly wind-down would be required to close its doors permanently to avoid a perpetual series of government bailouts."
CEA Chairman Christina Romer has provided some details about how the Obama administration plans to count the 3.5 million jobs it predicts will be created or saved under the $787 billion economic stimulus plan, reopening a debate about whether that achievement can ever be verified. As Greg Mankiw argues here, with the economy doing worse than when that prediction was first made, judging the results of the stimulus may be even more difficult. Was it wise to set such goals? Should economists always avoid them?
-- John Maggs, NationalJournal.com
Responded on May 18, 2009 12:26 PM
Isabel Sawhill, Senior fellow, Brookings Institution
There is no way to ever definitively establish how many jobs will be (or have been) created or saved by the stimulus plan. The reason is because we will never know what might have happened without the stimulus. As Greg Mankiw notes in his blog, recent unemployment rates have been more in line with what the Administration predicted in their baseline economic projection in January without the stimulus, leading to the impression that the stimulus has done virtually no good at all. But in my view, this would be the wrong conclusion. The Administration has correctly focused instead on the change rather than the level of employment likely to be associated with the stimulus package. It is almost certainly the case that the baseline forecast was too optimistic and that the picture would now look worse without the effects of the stimulus. It’s also my impression that the spend-out rates have been slower than originally anticipated which is another potential explanation for the somewhat disappointing effects to date. My view is that the Administration had to make these kinds of estimates of jobs created or saved and that they have done so in a perfectly reasonable way.
Responded on May 18, 2009 10:10 AM
J.D. Foster , Senior Economist, the Heritage Foundation
Greg Mankiw's response almost makes a very good point. "In light of the shifting baseline, it is impossible to hold the administration accountable for whether its policies are achieving their intended effects." Was there ever any question that the baseline would shift? Of course not. It might have shifted up. Instead it shifted down. The President and Chairman Romer were of course aware of the certainty of baseline shifts when they made the pledge. Accountability and transparency mean the Obama jobs pledge can only mean a certain minimum level of employment achieved at a specific point in time, both determined when the pledge was made. To conclude anything else necessarily implies the President was crassly cynical in making his 3.5 million jobs pledge in the first place. I take him at his word. Rather than impossible, it is simple and essential to hold the administration accountable. When he made his pledge, total employment stood at 135.1 million, so the President's target is 138.6 million, le...
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Greg Mankiw's response almost makes a very good point. "In light of the shifting baseline, it is impossible to hold the administration accountable for whether its policies are achieving their intended effects."
Was there ever any question that the baseline would shift? Of course not. It might have shifted up. Instead it shifted down. The President and Chairman Romer were of course aware of the certainty of baseline shifts when they made the pledge.
Accountability and transparency mean the Obama jobs pledge can only mean a certain minimum level of employment achieved at a specific point in time, both determined when the pledge was made. To conclude anything else necessarily implies the President was crassly cynical in making his 3.5 million jobs pledge in the first place. I take him at his word.
Rather than impossible, it is simple and essential to hold the administration accountable. When he made his pledge, total employment stood at 135.1 million, so the President's target is 138.6 million, leaving the Obama jobs deficit today at 6.2 million. http://www.heritage.org/research/economy/wm2430.cfm . I hope when January of 2011 comes along the President is able to claim complete success in hitting his jobs goal. I doubt he will, but we can hope, can't we?
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