After just four months, media figures ignore economists to declare stimulus a failure

››› ››› JEREMY HOLDEN

Media figures have used a recent comment by Vice President Biden -- that the Obama administration "misread how bad the economy was" -- to suggest that the economic recovery package is a complete failure, rather than noting the assessment by economists then and now that the legislation does not go far enough and that further stimulus spending may be necessary.

Rather than highlight the view then and now of progressive economists that the economic recovery package was too small, several media figures are now suggesting that the package is a complete failure. Those remarks -- made by, among others, CNBC's Larry Kudlow, Fox News' Sean Hannity and Greta Van Susteren -- follow recent comments by Vice President Joe Biden that the Obama administration "misread how bad the economy was." Kudlow, for example, said that the current jobs situation reflects not just a "misreading of the economy, but a misreading of the solution to the economy." Van Susteren raised the question of whether the stimulus package was a "house of cards." Neither noted the view by progressive economists, including Nobel laureate Paul Krugman, that the current situation means not that it was wrong to pass a stimulus, but that further stimulus spending may be necessary. Krugman, who among others advocated strongly for a bigger stimulus package than what was passed, said of the American Recovery and Reinvestment Act on July 5: "[I]t was never expected to do very much this soon. The problem, instead, is that the hole the stimulus needs to fill is much bigger than predicted. That -- coupled with the fact that yes, stimulus takes time to work -- is the reason for a second round, ASAP."

  • Discussing Biden's comments during the July 6 edition of The Kudlow Report, Kudlow asserted, "Here's a big problem: Wages have flattened and private hours worked keep declining. And the administration's $800 billion fiscal stimulus package has failed to stimulate. What Mr. Biden missed yesterday is not just a misreading of the economy, but a misreading of the solution to the economy."
  • During the July 6 edition of his Fox News show, Hannity asked whether Biden's comments indicated that "the White House finally admitting the stimulus has failed." Hannity subsequently characterized the stimulus as a "screw-up" after airing Biden's comments.
  • During the July 6 edition of On the Record, Van Susteren asserted, "If they're now saying that they misread it in January, then this whole policy -- this whole plan, 787 billion, is based on a house of cards. I mean, in the sense that -- on a false reading."

In fact, contrary to Hannity's suggestion that Biden was indicating that the White House thinks "the stimulus has failed," Biden specifically noted that is not the administration's view, stating in his July 5 interview on ABC's This Week:

BIDEN: The truth is, we and everyone else misread the economy. The figures we worked off of in January were the consensus figures and most of the blue-chip indexes out there.

[...]

BIDEN: And so the truth is, there was a misreading of just how bad an economy we inherited. Now, that doesn't -- I'm not laying this -- it's now our responsibility. So the second question becomes, did the economic package we put in place, including the Recovery Act, is it the right package given the circumstances we're in? And we believe it is the right package given the circumstances we're in. We misread how bad the economy was, but we are now only about 120 days into the recovery package. The truth of the matter was, no one anticipated, no one expected that that recovery package would in fact be in a position at this point of having to distribute the bulk of money.

Moreover, none of the three hosts mentioned economists, including Krugman, who reject the claim that economic performance since the passage of the recovery act indicates that fiscal stimulus was a failed policy and who say that further stimulus may be needed. For example, in a June 5 The Nation column headlined "Time For a New Round of Stimulus" by editor Katrina vanden Heuvel, University of Texas professor and The Nation contributor James K. Galbraith was quoted as stating: "This crisis is, above all, a crisis of unemployment, of foreclosures, and -- as we see in California -- of the essential services, including healthcare, that state and local governments provide. None of these will be remedied fast enough by the stimulus already in the pipeline. New, stronger, better targeted and faster-acting measures are needed, including general revenue sharing, a national infrastructure fund, a housing program and publicly-funded health care."

Also, in a June 5 blog post, Economics Policy Institute economist Heidi Shierholz stated: "The May employment report shows that while the pace of losses may be slowing, the U.S. labor market is still hemorrhaging jobs. With the continued loss of jobs and hours along with the collapse of wage growth, it is time to start thinking very seriously about additional stimulus spending."

From the July 6 edition of CNBC's The Kudlow Report:

KUDLOW: All right. I don't think it's the right package, but here is the key point. Even an optimist like myself has to acknowledge that the big drop in June jobs for both payrolls and households tells a bad story and it postpones recovery. There isn't going to be a real recovery until jobs start rising; it's the most important coincident economic indicator. And even while leading indicators from Fed money creation and financial improvements and credit market spreads, along with the rising stock market since early March and a pickup in commodities -- though not today on commodities -- all those are flashing "go" for future growth. But now, perhaps, that real growth may not come until the end of the year.

Here's a big problem: Wages have flattened and private hours worked keep declining. And the administration's $800 billion fiscal stimulus package has failed to stimulate. What Mr. Biden missed yesterday is not just a misreading of the economy, but a misreading of the solution to the economy. Tax rates should have been slashed across the board for individuals, businesses, and investors. And instead of fiscal nymphomania, we need incentives and rewards for risk-taking and job creation.

From the July 6 edition of Fox News' Hannity:

HANNITY: Is the White House finally admitting the stimulus has failed?

BIDEN [video clip]: We misread how bad the economy was.

HANNITY: All of that, plus Ann Coulter, Frank Luntz, and our great "Great American Panel."

[...]

BIDEN [video clip]: The truth is we and everyone else misread the economy. The figures we worked off of in January were the consensus figures of most of the blue chip indexes out there. [...] We misread how bad the economy was, but we are now only about 120 days into the recovery package. The truth of the matter was no one anticipated -- no one expected that that recovery package would in fact be in a position at this point of having distributed the bulk of the money.

HANNITY: I thought this was the worst economy since the Great Depression? Now, that was Vice President Joe Biden yesterday, discussing the stimulus package with ABC's George Stephanopoulos.

And if the stimulus screw-up wasn't enough, well brace yourself for the gargantuan cap-and-trade bill making its way through the Senate right now.

From the July 6 edition of Fox News' On the Record with Greta Van Susteren:

VAN SUSTEREN: OK, what is going on with our economy? Unemployment: 9.5 percent, and only 14 percent of the massive stimulus bill has been paid out so far.

Vice President Biden said this yesterday:

BIDEN [video clip]: We and everyone else misread the economy. The figures we worked off of in January were the consensus figures of most of the blue chip indexes out there. [...] The truth is there was a misreading of just how bad of an economy we inherited. Now, that doesn't -- I'm not laying this on anybody. We -- it's now our responsibility. So the second question becomes: Did the economic package we put in place, including the recovery act -- is it the right package, given the circumstances we're in? And we believe it is the right package, given the circumstances we're in. We misread how bad the economy was, but we are now only about 120 days into the recovery package.

VAN SUSTEREN: So, will the White House come hat in hand, asking for a second stimulus? Steve Moore, senior economic writer for The Wall Street Journal editorial page, joins us in Washington.

Steve, here's the problem that's really nuts, is that the stimulus package was crafted on what they -- how they read the economy. Now they say they misread the economy, so the stimulus package has to be suspect. If we are not having indicators right now that the economy is taking off, you know, there's a problem, a bigger problem, because we're not headed down the right track.

MOORE: Yeah, Greta, you know, I wish the White House would get its story straight on the economy. And it's not clear whether Joe Biden was maybe freelancing a little bit on those Sunday TV shows.

But if you think about the chronology here for a minute, Greta, remember during the election season, we were told this was the worst economy since the Great Depression and everything was horrible and we were in the midst of a financial meltdown. Then, after the president was elected and he presented his budget, we were told that -- we actually had rosy scenario from the White House, and they were taking numbers that were much better than the blue chip forecasts because they wanted to make the deficit look not so bad. Now we here are four months after the stimulus bill passed, and they can't quite get their stories straight. One day, the president says --

VAN SUSTEREN: Well --

MOORE: -- "Well, things look like they're improving." And then Joe Biden says today, "Well, we misread the economy. It's worse than we thought."

VAN SUSTEREN: OK, that politically looks bad, because they sort of get caught with their pants down, saying one thing one time, another thing, another thing.

MOORE: Right.

VAN SUSTEREN: The problem that I have is a little bit more fundamental, and I think a little more serious is that -- is that their stimulus bill in February was based on what their -- how they read the economy in January.

MOORE: That's right.

VAN SUSTEREN: If they're now saying that they misread it in January, then this whole policy -- this whole plan, 787 billion, is based on a house of cards. I mean, in the sense that -- on a false reading.

MOORE: Greta, I agree with that. I think that there's a lot of panic going on now in the White House with respect to these horrible unemployment numbers that we talked about the other night on the show. We have 15 million unemployed Americans right now. This isn't the way it was supposed to be. We were supposed to be putting a lot of those Americans back to work because of this $800 billion stimulus plan.

Posted In
Economy
Network/Outlet
Fox News Channel, CNBC
Person
Sean Hannity, Greta Van Susteren, Larry Kudlow
Show/Publication
On The Record with Greta Van Susteren, Hannity, Kudlow Report
Stories/Interests
Economic Recovery Plan
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