Advisor Pledges Barack Obama Will Hold Unemployment Below Ten Percent

Clearly playing the expectations game ahead of President-elect Barack Obama taking office, the incoming chairman of the National Economic Council said Sunday that Obama's economic plan will keep the nation's unemployment rate below ten percent. The unemployment rate is currently 7.2 percent, which means that Summers' pledge can be seen as an admission that the incoming Administration expects to see staggering job losses in the sort term. "I think while we're going to see substantial job losses, frankly what's important about the president's program here is that it is going to contain what would otherwise be just a vicious cycle," Summers said.

To put the anticipated job losses in context, the current recession started in late 2007 when the unemployment rate stood at 4.9 percent. The increase of 2.3 percent represents 3.6 million jobs lost in the past year. Summers' prediction of an unemployment rate of 10 percent means that the Administration would consider it a success if an additional 4.5 million jobs were lost on President Obama's watch. That would bring the rate to just under ten percent, achieving the goal set by Summers. The figures assume, of course, that the massive $850 billion stimulus package that the Democratic Congress and the Obama Administration plan to enact actually works. If not, greater losses can be expected.

President-elect Obama has almost no choice but to dramatically downplay expectations for his Administration. But Summers' prediction calls into question the wisdom of the economic plan that the Administration plans to pursue. If a good outcome of the plan would result in a loss of another 4.5 million jobs, the Obama Administration might want to give more serious consideration to alternatives which may have a more immediate impact on job creation. Republicans in the House have proposed their own stimulus bill, which includes an across the board income tax cut of five percent, a ten percent cut in the corporate tax rate, and making the 15 percent capital gains tax rate permanent. All three would boost business' bottom lines, which would help spur job creation. But the Administration seems intent on spending its way out of the current economic morass. And it seems ready to accept things getting a whole lot worse before they get better.