Nancy Pelosi’s misfire on job and tax-cut claims
“The payroll tax cut that the president proposed would put $1,500 in the pockets of 160 million Americans. The unemployment insurance extension is not only good for individuals, it has macroeconomic impacts. As the Macroeconomic Advisers have stated, it would make a difference of 600,000 jobs to our economy.”
— House Minority Leader Nancy Pelosi (D-Calif.), Dec. 15, 2011
With the days ticking toward the end of the year, Democrats and Republicans have been battling over the best way to extend a payroll tax cut and unemployment insurance for the long-term unemployed.
In a news conference Thursday, appearing to look at notes, Pelosi laid out her case for swift action. How well did she make it?
Pelosi cited two key figures — how much money the tax cut would bring to working Americans and how many jobs would be created from extending unemployment insurance. She managed to mangle both.
In the case of the payroll tax cut, it is incorrect to suggest that every working American — 160 million people — will get $1,500 back in payroll taxes. The amount depends on how much money a person earns.
The $1,500 figure actually refers to the average payroll tax cut for the typical household earning $50,000, according to a White House fact sheet. Other will get more — and many will get less, depending on their income.
Pelosi is in good company on this error. President Obama earned two Pinocchios for making a similar mistake three different ways in an interview a few months ago.
Pelosi also exaggerates the impact of an extension of unemployment insurance. She cites Macroeconomic Advisers, an economic forecasting firm, but its report predicted a gain of only 200,000 jobs from giving more aid to the uninsured.
Indeed, the report noted a certain irony about the effects of the policy:
Recent research suggests that emergency unemployment benefits have increased the unemployment rate by raising the labor force and perhaps by reducing the intensity of job search. Our own estimate is that these benefits currently boost the labor force enough to raise the unemployment rate 0.6 percentage point. Hence, extending unemployment benefits for another year will raise GDP [gross domestic product] growth and employment modestly, but also prevent an even larger decline in the labor force and hence a decline in the unemployment rate.
Some readers might wonder how helping the unemployed manages to create any new jobs. That’s because the unemployed must still pay rent, buy food and so forth. The money they receive from the government thus helps keep other Americans in their jobs.
The Congressional Budget Office, in a report last month on different ways to boost the economy, put extending aid to the unemployed near the top in terms of its positive impact on the economy. (See Table 1 on page 28.)
A Pelosi spokesman said she misspoke and that she was trying to cite Macroeconomic Advisers’ overall estimate of the effects of both cutting the payroll tax and extending unemployment aid. That figure is indeed 600,000.
Of course, this is just one report based on one economic model — and Macroeconomic Advisers’ has been on the high end of the estimates.
Bloomberg News surveyed 28 economists, including Macroeconomic Advisers, and came up a with a radically different figure for the overall impact of Obama’s jobs plan — an average of 275,000 jobs would be added or saved in 2012. Five economists, in fact, said no jobs would be created — and one said only 1,000 jobs would be added or saved in either 2012 or 2013. By contrast, Macroeconomic Advisers predicted a gain of 1.3 million jobs for the full plan.
The Pinocchio Test
Pelosi gets some credit for at least referencing a specific report rather than simply asserting a figure. As we mentioned, we try not to play “gotcha” with politicians who slip up. But she made two major errors in a row.
Check out our candidate Pinocchio Tracker