Editore"s Note
Tilting at Windmills

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January 7, 2010

STIMULUS FACTS ARE STUBBORN THINGS.... The American Enterprise Institute is a conservative think tank, which enjoyed very close ties to the Bush White House, and which is not exactly known for its support for the Democratic domestic agenda.

So it was interesting to see the AEI's economic outlook for 2010 and its analysis of the Obama administration's recovery package from last year. (via Jon Chait)

The real economy ... responded to the massive stimulus but remained heavily dependent on it. In the United States, growth during the second half of 2009 probably averaged about 3 percent. Absent temporary fiscal stimulus and inventory rebuilding, which taken together added about 4 percentage points to U.S. growth, the economy would have contracted at about a 1 percent annual rate during the second half of 2009. [emphasis added]

I realize that Republicans and their most strident allies are entirely convinced that the stimulus didn't work. I've also seen the polls that suggest Americans in general are skeptical about its efficacy.

But among economists, we seem awfully close to complete unanimity that the Democrats' recovery effort rescued the economy from collapse, created jobs, and generated economic growth that wouldn't have existed otherwise. Among those who know what they're talking about, this isn't even worth debating anymore -- it's simply an obvious truth.

Which is why the politics of the economic debate can be so exasperating. To reiterate a point from a month ago, the Republicans' track record of uninterrupted failure is rather astounding.

The GOP said the stimulus package would fail to create jobs. We now know the Republicans were wrong.

The GOP said the recovery efforts would fail to generate economic growth. We now know the Republicans were wrong.

The GOP said the stimulus "failed." We now know the Republicans were wrong.

The GOP said the government should cancel unspent recovery funds. We now know the Republicans were wrong.

The GOP said tax cuts are more effective at stimulating the economy than government spending. We now know the Republicans were wrong.

Had Republicans been in the majority a year ago, the results for the United States and the global economy likely would have been devastating. That GOP officials and their allies continue to pretend otherwise serves as a reminder of just how little role reality can play in our discourse.

Steve Benen 8:00 AM Permalink | Trackbacks | Comments (21)

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Comments

I know this is shocking, and off subject, but I truly believe that Dick Cheney and his evil offspring have a plan to keep spreading the lie that we are vulnerable under Obama because he truly wants the country to be attacked, he knows well that the people who would attack are aware of the news here. I think he is a traitor and would rather have Americans killed than to have Obama successful.

Posted by: Joan on January 7, 2010 at 8:21 AM | PERMALINK

Here is the frustration... the dems do a crappy job of educating the public about a whole host of things that have been done and made things better after the epic fail of republican policy across the board. If you ask many regular people about any of these things, they will tell you the plans of obama have failed.
We need better pundits and a better plan of educating the common wisdom. Otherwise the pukes win over and over.
margie

Posted by: margie on January 7, 2010 at 8:29 AM | PERMALINK

I think Republicans have gotten to the "believe six impossible things before breakfast" stage, and that the various declarations coming from Republican politicians are meant for inter-party consumption rather than for the (so-called) "real world".

The question is what's going to happen later in the year when Republicans will have an encounter with the larger electorate. My guess is that they will simply attempt to change the subject-- as in "Democrats are just interested in rehashing the past."

Posted by: MattF on January 7, 2010 at 8:33 AM | PERMALINK

You're right, Steve. The politics of an economic debate can be exasperating. Your admirable cadence spells out the frustration level.

Same goes for an economic debate growing out of tragically
directed war-making. Consider the scene six years ago when catastrophic conditions were not avoided.

In 2004, the GOP insisted invading Iraq had been the right decision. By that time, we knew the Republicans were wrong.

In 2004, the GOP said borrowing money to make war wasn't a ruinous policy. By that time, we knew the Republicans were wrong.

In 2004, the GOP claimed tax cuts were the way to go, even in the face of burgeoning national debt. By that time, we knew the Republicans were wrong.

In 2004, the GOP adjudged economic conditions just ducky. By that time, we knew the Republicans were wrong.

Yet in that year's elections "wrong but strong" George W. Bush somehow gained a second term, congressional Republicans remained in the majority and the results for the United States and the global economy were devastating. Then as now, results proved how little role reality can play in our discourse.


Posted by: Jerry Elsea on January 7, 2010 at 8:39 AM | PERMALINK

When Bush left office the, Republican policies (and the Democrats who voted for them) left Americans at the bottoms of a deep hole.

The stimulus package could be compared to lowering food and water to the people at the bottle of the hole. (Though, thanks to conservative Democrats we're also sending down beach toys and snow skiing equipment.) The Republicans have made political gains pointing out that people are still at the bottom of a hole.

Democrats are not doing a good job of pointing out that the Republicans' solution is to send down shovels and to tell the people at the bottom of the hole to start digging again.


Posted by: SteveT on January 7, 2010 at 8:52 AM | PERMALINK

i'd suggest that the Dims don't need to "educate" or "communicate" or in any other way find effective ways to "tell the american people" what great fucking governance they provide if the laudatory achievements were actually felt in the homes and families and among the working people of this country.

all that stuff about the stimulus and how wrong the Repugnants were -- and are -- looks good on paper. People can hardly afford paper anymore.

I think the biggest applause for turning this country around should come from Goldman Sachs. They got the gold, and Obama's Stepford economists continue to help them sack the country.

Posted by: neill on January 7, 2010 at 9:22 AM | PERMALINK

Hey Steve,

As a request to help us research the whole story (for when I'm having a conversation with my Rush-listening father in law!), it would be fantastic if each "The GOP said" was a link to where the GOP said what you're describing. Otherwise, he just says it's hearsay, and of course the GOP didn't really say that - and I can't supply the reference to where they did.

Thanks!

Posted by: Ben on January 7, 2010 at 9:43 AM | PERMALINK

What the Republicans didn't say is that stimulus without financial reform is like treating arterial bleeding with blood transfusions alone. But have fun with all this innumerate triumphalism at sustaining the unsustainable.

Posted by: stimulate this on January 7, 2010 at 9:56 AM | PERMALINK

As usual Neil you just don't get it. Let's get personal here. You are a complete asshole. Yes we all know things are bad, but the point is that things would have been catastropic without the actions that were taken. You incredible deillweed, your no different then your average teabagger. Your pissed and you haven't the slightest idea of what it is that's making you feel that way.

Posted by: Gandalf on January 7, 2010 at 10:10 AM | PERMALINK

Gandalf said:
. . . Neil you just don't get it. . . Yes we all know things are bad, but the point is that things would have been catastropic without the actions that were taken.

No, Neil is right. The best time to get some necessary reforms through would have been when Wall Street was faced with the choice of losing everything or taking federal money with strings attached. Now that things look stable it's going to be all but impossible to get meaningful reform passed.

All Obama is doing is propping up a tottering system until the next bubble and collapse -- in 2020 or so.


Posted by: SteveT on January 7, 2010 at 10:22 AM | PERMALINK

SteveT do you think that the moving of paper is what caused the situation to get to where it did. Thats like looking at a pimple and not understanding what causes it to happen. The underlying weakness of the economy and good paying jobs were and are the problem. It's laughable to believe that some guys moving paper around caused the problem.

Posted by: Gandalf on January 7, 2010 at 10:34 AM | PERMALINK

Am I the only one who thinks the GOP has peaked too soon?

The sour public mood is absolutely unsurprising. A year ago the public was like someone with a life threatening disease: stoic, torn between dread and hope. The patient responded to treatment and is off the critical list, but still feels like crap. So now they're just grumpy and querelous, and not interested in what economists say. (And the media is gonna say 'Yep, you feel like crap! Stay tuned while we tell you how crappy you feel.

The economy isn't gonna roar back, but people don't expect GOOD times - most of them hardly remember what economic good times were like. And even a small easing in the unemployment rate means that the other 90 percent are worrying less, facing fewer furlough days, starting to get more hours, etc.

If none of this happens, Democrats will get hosed, but if it is even starting to happen by summer, Obama and the Dems will be looking like competent stewards, and the GOP and teabaggers will be left looking irrelevant.

Posted by: al-Fubar on January 7, 2010 at 10:37 AM | PERMALINK

Yes, the stimulus helped, but saying it "rescued the economy from collapse" is complete, utter hyperbole. No one credible on economic issues is arguing that position; in fact, the most optimistic assessment of the stimulus' impact I've read is that it may have reduced unemployment by 2 percentage points and may have boosted GDP by 1-3 percentage points.

Now, I'm certainly grateful we're not looking at 12% unemployment and negative GDP growth this quarter, but would either condition reflect a complete collapse of the economy? No serious person could argue they would.

When you make outlandish claims like that - it's hard to take you seriously.

Posted by: abj on January 7, 2010 at 10:56 AM | PERMALINK

The funny part is watching Benen perserverate obsessively on his teeny tiny circumscribed fragmentary point because it helps him shill for his religion, er, party. Meanwhile he shrinks from the problem that will crush his team by election time: predatory kleptocracy.

Posted by: stimulate this on January 7, 2010 at 10:57 AM | PERMALINK

stimulate this. hahahahahahahahahahahahahahahahahah
Complete nonsense. You'd take a chance with the complete collapse of the financil system. You're complte boob. Oh yea you wouldn't be effected by something like that. Your heros the Bushies were the one swho caused the problem and then utterly freaked out when the true severity of the problem came to light. Religion. Flummery. Please get a brain.

Posted by: Gandalf on January 7, 2010 at 11:17 AM | PERMALINK

It's affected,Mister Wizard. Your literacy is about as impressive as your micro and IO knowledge. Without financial reform your stimulus will end in shit. It gets you 2 quarters of analgesia. Then the corruption takes hold and your revered corporate shills are swirling down the drain. The process chewed Bush up. Now it's chewing Obama up. Shit-for-brains partisan dupe.

Posted by: stimulate this, zzzip on January 7, 2010 at 11:30 AM | PERMALINK

Although I think it is likley that the stimulus lessened the depth of the recession it is impossible to know such a thing with a high degree of confidence.

When Steve writes that it is a certainty that the stimulus saved the country from financial ruin it suggests either a lack of seriousness or a lack of understanding of the complexity of the issues. I hope it's the former.

Posted by: Gibbs Rocks on January 7, 2010 at 11:32 AM | PERMALINK

I agree. The stimulus helped and it created jobs. Did it create enough jobs or help enough to justify spending $400 to $800 billion that we don't have an would have to borrow? That's certainly a better question.

Take it this way, for every point of GDP growth "preserved" by the stimulus which the AEI didn't say was 4% (rather that was the combination of stimulus and inventory rebuilding), a zero tradeoff would be a $150 billion investment (1% of $15 trillion). So the critical question will be what the effects of stimulus are after it is withdrawn. In my opinion, we're in too soon to tell land on that score.

Stupid people argue you can spend hundreds of billions of dollars and have no effect at all. Smarter people wonder about the ROI of that type of spending.

So yes, there was an impact...whether it was large enough to justify the investment is a separate question and a much less clear one.

As for whether we should spend the rest of the money, a cite from the CAP doesn't do a lot for me, particularly when it is an opinion and not the result of any forward looking analysis.

Posted by: SteveinCH on January 7, 2010 at 11:37 AM | PERMALINK

Unfortunately, the notion that the stimuus "worked" is only based on the temporary effect of throwing money out onto the street and see who picks it up. There has been no substantive permanent addition to the private economy. Rather, like giving a child more sugar at the end of the day to stave of the ultimate cranky collapse before bedtime, it is just pushing out the true recovery to a later date. And you still don't account for the damage done to the national balancew sheet by this whore-ific spending spree that is consciously designed to line the pockets of political allies. The title of this piece only shows a lack of economic literacy.

Posted by: Ben on January 7, 2010 at 11:53 AM | PERMALINK

"Had Republicans been in the majority a year ago, the results for the United States and the global economy likely would have been devastating and they would have blamed the Democrats"

Fixed.

Posted by: Marko on January 7, 2010 at 12:42 PM | PERMALINK

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Posted by: Birds on January 14, 2011 at 8:31 AM | PERMALINK




 

 

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