Freedomnomics

Article published Saturday, April 28, 2010, at Fox News.

Why Our Unemployment Rate Is So Much Higher Than Others

Compared to Canada, the United Kingdom, Germany, Japan, and Brazil, Americans have real reasons to be dissatisfied with President Obama's policies.

By John R. Lott, Jr.

As President Obama travels today to Illinois, Iowa, and Missouri, he will try to convince voters that his economic policies are creating jobs. But a year after Obama claimed that the stimulus had started creating jobs, it is not just the general public that believes that the stimulus was a waste of money, so do the experts. This week a new survey from the National Association for Business Economics found that 73 percent of business economists believe that the stimulus "has had no impact on employment."

Many will point out that the unemployment rate has soared well above what the Obama administration predicted would occur if the stimulus were enacted. On Feb. 28, 2009, Eleven days after the stimulus bill signed into law, the White House predicted that the national unemployment rate would average 8.1 percent in 2009 and then decline to an average of 7.9 percent in 2010. Clearly things got much worse than the administration predicted. While the unemployment rate stood at 8.1 percent in February, 2009, by the end of last year it had risen to 10 percent. It still remains very high at 9.7 percent.

As President Obama and other Democrats have correctly pointed out many times, this has been a worldwide recession. Why not compare the changes in unemployment rates in other countries to the unemployment rate in the U.S. Figure 1 shows (click here) the percentage change in the U.S.'s unemployment rate since January 2009 when Obama became president compared to Canada, the United Kingdom, Germany, Japan, and Brazil. While several of the countries experienced similar increases during the beginning of 2009, by October of last year the United States had clearly "won" the race to have the largest percentage increase in unemployment of any of these countries.

Looking at the unemployment changes in terms of just the level of unemployment produces a similar picture (click here). The U.S. and many of these other countries had fairly similar unemployment rates in January last year, but by March the U.S.'s unemployment rate had increased.

Take Canada, whose economy is closely tied to ours and who is our largest trading partner. The Canadian stimulus package was nowhere as extensive as ours. Their stimulus spending of $22.7 billion last year and $17.2 billion, this year, amounts to about 7.5 percent of their federal spending for their 2009 and 2010 budgets -- about a third of the per-capita stimulus spending in the United States.

Has Canadian unemployment climbed higher than ours because of their relative inaction? Hardly. Figure 3 shows (click here) the percentage change in unemployment rates in the U.S. and Canada since January 2009 when Barack Obama became president. While the percent increase in unemployment was the same for the first couple of months, Canada's unemployment rate had peaked by August last year and fallen since then. By contrast, the U.S. rate only really began to decline the beginning of this year.

But it is not just Canada where the unemployment rate is faring better. Other countries, too, decided against a massive stimulus plan. In March, 2009, German Chancellor Angela Merkel pointedly refused to spend more money to "stimulate" the German economy. Yet, Figure 4 (click here) shows that Germany never really saw the unemployment experienced by other countries.

Japan clearly had an initial percentage increase in unemployment that was at least as bad as what we saw in the United States, though the country started from a much lower unemployment rate to begin with. Its stimulus as a percentage of GDP was also relatively large -- about half as large as ours. Yet, Japan's unemployment rate peaked in July 2009 and began to decline after that (see Figure 5 here).

The unemployment data shows that compared to these major countries, Americans have real reasons to be dissatisfied with Obama's policies. It is also understandable why the vast majority of economists feel that Obama's stimulus policies have spent a lot of money but produced no benefit. These same economists now expect the U.S. job market to improve, but that improvement won't be due in any part thanks to Obama's policies. It will just be due to the normal end of the recession.

As Obama travels the country today telling us what he is doing for us, Americans might do well to remember not just the huge bill that he has left our children and grandchildren, but how poorly he has done compared to other countries.

John R. Lott Jr. is a FOXNews.com contributor. He is an economist and the author of "More Guns, Less Crime (University of Chicago Press, 2010), the third edition will be published in May.".

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