1. The stimulus plan didn't work. Every Republican candidate got the memo: Campaigning against the $814 billion Recovery Act passed in February 2009 is a winner. When the Democrat-controlled Congress passed the stimulus plan, the unemployment rate was 8.2 percent. On Election Day, it will be 9.6 percent. Polls show that only about one-third of likely voters think the stimulus plan helped the economy, while two-thirds think it did nothing or caused harm. The phrase "failed stimulus" is among the top GOP talking points, and it's a reliable rallying cry in the campaigns.
If the goal of the stimulus plan was to reverse the worst recession in 75 years by the time of the next election, then sure, it was a failure. But most mainstream economists believe the stimulus helped end the recession months, and perhaps years, sooner that it would have ended on its own. The nonpartisan Congressional Budget Office says the stimulus plan added significantly to GDP growth and boosted employment by somewhere between 1.4 million and 3.3 million jobs. The problem for Democrats is they made foolish predictions about how the stimulus plan would save the economy, saying, for instance, that unemployment would top out at 8 percent in 2009 and be falling consistently by now. So they set themselves up for failure by creating unrealistic expectations. Economically, however, the stimulus plan was a modest success, and looking back it's not clear that any other ideas at the time would have worked better. The reason the economy still stinks is that we just endured a violent recession plus a financial panic, and a thoroughly trashed economy doesn't heal on a convenient political timeline.
2. The [Democrats] / [Republicans] are driving the nation toward insolvency. They both are, and in more or less equal measure. In 2001, when George W. Bush took office and Republicans controlled Congress, the budget was essentially balanced and the total national debt was about $5.8 trillion. Washington has run an annual deficit every year since. Over Bush's first six years, when Republicans controlled the White House and Congress, the debt rose by about $3.2 trillion. Over the last two years of the Bush administration, when Democrats controlled Congress, the debt rose by another $2.9 trillion. So over the eight-year Bush administration, the debt more than doubled, rising by a total of $6.1 trillion.
Obama, in his first two years, has added about $3.2 trillion more to the national debt. There are plenty of caveats. The pace of debt expansion under Obama is obviously faster, but that's due to the stimulus and to a shrinking economy that still hasn't regained all the ground lost since the recession began in late 2007. And both presidents passed programs with costs still to be tallied in the future. Still, any politician charging the other party with excessive spending could--and should!--level the same accusation at his own party. Republicans and Democrats alike are addicted to spending money they don't have.
3. Healthcare reform will cost $1 trillion. This is the premise behind Republican calls to repeal "Obamacare," the sweeping new healthcare reform law. Yet it's an extrapolation of an extrapolation, and only half the story at that. The Congressional Budget Office, the best source of data on the cost of healthcare reform, estimates that new government costs associated with reform between 2010 and 2020 will add up to about $1.2 trillion. That's the figure cited by critics of the plan. But CBO also says those costs will be offset by more than $1.3 trillion in cost savings and new revenue, which will lower the national debt by about $170 billion over that time period--not raise it. Accounting for just the costs, and not the offsets, is like calculating your household finances by adding up all your bills but leaving out the income used to pay for them.
Some analysts go even further than the $1 trillion half-figure, guessing at costs for healthcare reform that go out to 2024, which CBO has declined to put in writing. Even the nearer-term costs, CBO says, are subject to "considerable uncertainty," largely because they depend on future Congressional action and unforeseen events.
The Democrats are vulnerable on healthcare reform because they started out saying they'd produce a bill that would help lower the overall cost of healthcare, and ended up with a plan that doesn't really do that. Plus some voters are opposed to any further government role in healthcare, whether it lowers costs or not. But for now, at least, the numbers show that Obama's plan won't add to the debt. (Check the figures yourself by going to Box 1-1 in CBO's August 2010 budget update.)
4. The Obama administration is crushing small business. The U.S. Chamber of Commerce has been running ads on behalf of some Republicans saying that healthcare reform has been "crushing small business with billions in penalties." That claim depends on what you consider "small." The healthcare reform law exempts most companies with 50 employees or fewer, and many such firms would even qualify for healthcare subsidies. The fact-checking site Politifact quizzed the U.S. Chamber on its claim, and a spokesperson explained that it really applies to firms with between 50 and 500 employees. Still, those firms account for just 3 percent of all firms with 500 workers or fewer. So what the Chamber really means is that healthcare reform is crushing up to 3 percent of all small businesses, which itself would be a stretch. But it hasn't repealed the claim, even though Politifact grades it as "false" on its Truth-o-meter.
Many small businesses are struggling nonetheless, and a variety of tax cuts and other bits of aid passed by the Obama administration don't address the main problem: Business is down, which leaves no reason to hire or invest. Many small business owners find government paperwork requirements onerous, and that would have gotten worse if energy and immigration reform had passed this year. Neither party has really offered much to business owners and entrepreneurs, despite lots of verbal boosterism. Luckily they're used to managing on their own.
5. The Democrats have created jobs. In a folksy new "white board" video, White House economic advisor Austan Goolsbee stands before a job-loss trendline that seems to show a sudden improvement once President Obama took office in January 2009. "We've now had nine straight months of private-sector job growth," he says. Goolsbee is right--but be on the lookout for the phrase "private sector" every time a Democrat tries to make the case for job growth. The modifier is needed because other sectors of the economy are still shedding jobs--especially state and local government--and the overall trendline is still negative. If you add up all the numbers, here's what they show:
Net job losses under Bush, from the employment peak in December 2007 through January 2009:
Total: 4.4 million
Private sector: 4.6 million
Government: 250,000 gain
Net job losses under Obama, January 2009--September 2010:
Total: 3.3 million
Private sector: 3 million
Government: 357,000
Private-sector employment has started to tick up, but it's still being more than offset by cutbacks in government jobs--which means Goolsbee's bar graphs would be below the zero line for the last four months if he included all jobs, and not just private sector ones. And the overall job market is still in a huge hole, compared to where it was on Obama's first day. Democrats can crow about marginal job gains in this or that sector, but the economy won't bounce back for good until all the big sectors are adding jobs. Maybe the economy will cooperate by the next election.
