by Bill McBride on 7/05/2009 07:03:00 PM
Sunday, July 05, 2009
From ABC's This Week, George Stephanopoulos interviews Vice President Joe Biden:
STEPHANOPOULOS: While we've been here, some pretty grim job numbers back at home -- 9.5 percent unemployment in June, the worst numbers in 26 years.Here is the January forecast with the BLS reported data ...
How do you explain that? Because when the president and you all were selling the stimulus package, you predicted at the beginning that, to get this package in place, unemployment will peak at about 8 percent. So, either you misread the economy, or the stimulus package is too slow and to small.
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: ... 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.
STEPHANOPOULOS: No, but a lot of people were saying that you needed to do something bigger and bolder then, including the economist Paul Krugman. He's saying -- right now he's saying the same thing again -- don't wait. You need a second stimulus, you need it now.
BIDEN: Look, what we have to do now is we have to properly, adequately, transparently and effectively spend out the $787 billion.
The question is, how do you now -- do we -- what we have to do, George, is we have to, as this rolls out, put more pace on the ball. The second hundred days you're going to see a lot more jobs created.
And the reason you are is now all of these contracts for the over several thousand highway projects that have approved.
STEPHANOPOULOS: ? today are going to run out of unemployment in September. That means for a lot of those people, if there is not a second stimulus, they're going to be out in the cold.
BIDEN: Well, look, we have increased the amount of money unemployed -- those on unemployment rolls have gotten, 12 million are getting more money because of the stimulus package.
We've increased the number of people eligible by 2 million people. We've given a tax cut to 95 percent of the people who get a pay stub. They have somewhere -- $60 bucks a month out there that's going into the economy.
There is a lot going on, George. And I think it's premature to make the judgment?
STEPHANOPOULOS: So no second stimulus?
BIDEN: No, I didn't say that. I think it's premature to make that judgment. This was set up to spend out over 18 months. ... And so this is just starting, the pace of the ball is now going to increase.
Click on graph for larger image in new window.
This graph compares the BLS reported monthly unemployment rate (in red) with the Obama economic forecast from January 10th: The Job Impact of the American Recovery and Reinvestment Plan
The Obama administration underestimated the rise in unemployment (so did I last year), so the question is: does this mean a 2nd stimulus plan?
Krugman says don't wait:
But never mind the hoocoodanodes and ayatollahyaseaux. What’s important now is that we don’t compound the understimulus mistake by adopting what Biden seems to be proposing — namely, a wait and see approach. Fiscal stimulus takes time. If we wait to see whether round one did the trick, round two won’t have much chance of doing a lot of good before late 2010 or beyond.Update: as of June, almost 4.4 million people were unemployed and had exhausted their regular unemployment benefits. Most are now receiving extended benefits, but - at the least - it might be prudent to have additional extended benefits ready to go later this year.
Posted by Bill McBride on 7/05/2009 07:03:00 PM