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July 06, 2011 8:40 AM Stimulus perception vs. stimulus reality

By Steve Benen

A couple of developments from late last week have renewed discussion on the efficacy of the 2009 Recovery Act. For those who take reason and evidence seriously, the debate is more than welcome.

Driving this is Mitt Romney’s flip-flop-flip on whether President Obama’s policies made the economy “worse,” as well as a White House report showing that the stimulus made the difference between an economy that was shrinking and one that’s growing. There are as many as 3.6 million Americans with jobs today who wouldn’t have otherwise had them were it not for the Recovery Act.

At this point, the debate quickly becomes mind-numbing. Republicans insist that the stimulus “failed” because the economy is still weak. Democrats, economists, and people who are good at arithmetic explain that the stimulus grew the economy and created millions of jobs.

Most Americans side with Republicans, because the GOP’s talking points have a certain visceral appeal — Dems tried to “fix” the economy, the economy isn’t soaring, ergo, Dems are wrong. Told that a bigger and more ambitious stimulus would have been more successful leads to knee-jerk Republican mockery that the public also finds compelling — if spending didn’t work, why would more spending have worked?

Ezra Klein had a good piece on this yesterday, but I wanted to add one thing.

[T]hough questions of how well the stimulus worked may be complicated, simply pointing out that unemployment remains high, or that the recession was worse than anyone realized back in January of 2009 and so projections made in January of 2009 haven’t held up very well, is neither here nor there. The fact that a starving man is still hungry after eating a burger doesn’t mean the burger did a bad job.

Any serious assessment of the stimulus needs to include some variation of the six words that appear in the CBO’s study: “compared to what would’ve happened otherwise.” If the stimulus created three million jobs even as the economy lost seven million jobs, the stimulus worked. If it created only one million jobs, it performed far worse than the administration promised.

Either way, the stimulus was swamped by an economic crisis it was never large enough to neutralize. But that doesn’t make it unsuccessful. That just makes its success or failure difficult to discern. The same thing would’ve happened if the recession had been milder than expected and economy had only lost a million jobs. In that world, a $787 billion stimulus that only created 500,000 jobs might look better, but it would’ve been a huge failure. If your argument can’t survive that counterfactual — and “look at the unemployment rate!” very much can’t — then your argument is wrong.

Exactly. I’d also note, though, that those making this wrong argument have an additional problem: what they proposed at the time.

In 2009, with the economy on the brink of wholesale collapse, Democrats rallied behind a stimulus measure that rescued the economy, generated growth, created millions of new jobs, and technically even ended the recession. At the exact same time, discredited Republicans not only predicted that the Recovery Act would make the economy worse (mistake #1), they also said the smarter course of action was a five-year spending freeze (mistake #2) and a balanced budget amendment to the U.S. Constitution (mistake #3).

We generally evaluate the stimulus against “what would’ve happened otherwise,” as if there were two options: Recovery Act vs. nothing. But two years ago, we actually had three options: Recovery Act, nothing, and a Republican plan to take billions out of the economy at a critical moment.

The stimulus not only worked, it prevented a crisis that the GOP agenda would have dramatically exacerbated. That these same Republicans claim credibility now — and that reporters and much of the public agree with them — is a national embarrassment.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

Comments

  • c u n d gulag on July 06, 2011 8:58 AM:

    Maybe, just maybe, things may slowly be changing.

    When two obtuse Villagers like Brooks and Cohen start to write not about how feckless the Democrats are, but how dangerous the Republicans are, we may be seeing a shift in how both groups are treated.

    If you look historically, Conservatism has been an outright disaster for this nation. But no one does. Why? Because it offends Conservatives, who then whine and drone on and one about Liberal media bias.

    As evidence that Conservatism has been a disaster,cutting taxes hasn't created jobs - just the opposite, in fact - see early Reagan and all of Little Boots; while tax INCREASES have - one only has to look at latter Reagan, Bush I, and Clinton to see this. But again, this isn't mentioned often enough to sink into people skulls.

    If Bobo and Cohny are awakening, maybe some of their other obuse coleagues may be too.

    Nah, their recent columns are most likely one-off outliers. Their next columns will probably be about how Obama's being a 'dick' without using that word.

  • stevio on July 06, 2011 9:08 AM:

    I think 230 million new jobs was more than enough to have a good recovery. Unfortunately Rick Santorium had the wrong country. I think he was speaking of the jobs created in China that were created using the interest we paid them for on the money we borrowed for the two wars and the unfunded medicare drug mandate...

  • watl on July 06, 2011 9:08 AM:

    Republicans may be craven and vile but they're not stupid. They knew the stimulus would work, which is why they did everything possible to limit it. There is simply no historical record that shows that austerity is a better program than Keynesian economics. Everyone knows this.

    Republicans will win these talking-points wars because they lie as other people breathe. Once a Republican is president in 2013, they'll find ways to pump money into the economy while still blaming Obama for high unemployment. If the economy improves as a result, proof that austerity works! When someone points out that the deficits are still high, they'll shake their heads and blame Obama. And Obama will get blamed if it rains during your picnic. Etc, etc.

    I don't enjoy knocking Obama for what's happened but if your leadership style tends to passivity, you will not control events so much as be controlled by them. Obama core economic team failed him. Republicans routinely fail America. But it's Obama's failure that ultimately matters most. You either ride this bronco called destiny or you die trying. What's Obama's point? A second term? That's simply not good enough.

  • martin on July 06, 2011 9:10 AM:

    I know auto analogies are passe, but saying the stimulus failed because the economy is still bad is like walking away from a car wreck and saying the airbag failed because the car is totalled.

  • berttheclock on July 06, 2011 9:23 AM:

    However, perception counts. When one can look around their areas and see so many For Sale signs, many of which have been on the market for months, it becomes kind of hard to tell people about the many "jobs" created by the stimulus. One of the biggest problems in Oregon and Washington State is the rapidly diminishing group of qualified buyers. Many of these "jobs" were band-aid jobs without providing the long term buying power. Many of the houses for sale are, at least, 100 thousand dollars lower in value than in '07, yet, they still can not be sold as there are few qualified buyers.

  • SteveT on July 06, 2011 9:28 AM:

    Once again, this is an opportunity for the guy with the biggest microphone to step up and change the debate with a national address about where we were compared to where we are now. It would be a chance to set the record straight on the first stimulus and argue for more.

    The trouble is, I don't know whether Obama believes in Democratic party principles anymore. The only "stimulus" that he's offering is tax cuts for businesses, as if businesses are going to hire hire more workers when there's no one buying what they're selling now. And he has embraced the Republican canard that the deficit is the country's biggest problem while ignoring how much of the deficit is caused by high unemployment -- too many people getting Medicaid, Medicare and unemployment and not paying income taxes.

    As far as I can tell, Obama believes that if we cling to the status quo, then multinational corporations will rescue us all.

    It's a far cry from "Change you can believe in".

  • karen marie on July 06, 2011 9:44 AM:

    The other important factor is that the stimulus should have been bigger than it was but was held back by foot dragging and tantrums by Republicans and insistence that the Bush tax cuts be renewed.

    If even only the Bush tax cuts had been allowed to expire, we would have been in a better position. If there had been a bigger stimulus package, we would be in a far better position.

    But instead we have cost shifting onto the middle class as states slash their budgets because of lack of federal assistance and property taxes are raised because states are slashing assistance to towns and home values have halved.

    But god forbid anyone should mention those things in a newspaper or news program.

  • square1 on July 06, 2011 9:45 AM:

    I'm sorry, but our elected Democrats are just stupid. Because the GOP elected to oppose the stimulus from the get go, it was entirely forseeable that the GOP would also try to discredit its effectiveness.

    However, unlike Benen, I do not find the GOP's arguments to be inherently compelling. In a recession/depression, "do nothing" does not send thrills up the collective legs of the electorate.

    To the extent that the GOP has been winning the message war it is because the Democrats are stupid, incompetent and timid. To wit:

    (1) they never asked for a big enough stimulus. it should be self-evident but IF the economy recovered faster than expected, the administration could have slowed spending so that there wasn't overheating. I consider it a sign of weakness that the WH preferred to let Congress maintain more control over fiscal matters.

    (2) when it quickly became clear that stimulus was too small, the WH refused to admit it. Instead they pointed to "green shoots" as proof that the bill was working.

    (3) although some Democrats have finally admitted that the bill was too small, their "lack of stomach" for more stimulus undermines the argument for the initial stimulus. After all, why should the public believe Democrats when they say that stimulus worked in 2009-2010, if they are too gutless to call for stimulus NOW when the economy continues to falter?

    (4) Democrats, led by Obama, have needlessly confused their own message by repeatedly focusing on anti-stimulative debt-reduction policies. Obama created the Simpson-Bowles commission, unilaterally froze federal pay, and praised the "historic" budget cuts.

    (5) and now, Obama seems on the verge of cutting a further anti-stimulative deal with the GOP. When he does, I guarantee you that he will not blame the GOP for forcing him to cut a deal that will cost jobs.

    Had Obama had the courage and foresight to demand a sufficiently large stimulus package in 2009, unemployment would be at about 5%, the economy would be growing, and the GOP's message that stimulus "failed" would sound incredibly stupid.

  • June on July 06, 2011 9:59 AM:

    Walt said: "I don't enjoy knocking Obama for what's happened but if your leadership style tends to passivity, you will not control events so much as be controlled by them.... You either ride this bronco called destiny or you die trying. What's Obama's point? A second term? That's simply not good enough."

    Walt, it seems you do not miss an opportunity to suggest Obama is a weak leader -- but what in the world are you talking about there?

    Obama is the one who launched talks on the debt ceiling as far back as last year.

    In his own words, this is how the Prez has been out front on resolving this debt ceiling situation:

    "And Iíve got to say, Iím very amused when I start hearing comments about, well, the President needs to show more leadership on this. Let me tell you something. Right after we finished dealing with the government shutdown, averting a government shutdown, I called the leaders here together..... I put Vice President Biden in charge of a process -- that, by the way, has made real progress.... I met with every single caucus for an hour to an hour and a half each -- Republican senators, Democratic senators; Republican House, Democratic House. Iíve met with the leaders multiple times. At a certain point, they need to do their job."

    Walt, I don't understand why you consistently blame Obama for Republicans' bad behavior. Obama and Biden initiated and have been in constant meetings with Republicans about their debt ceiling insanity for at least six months now. Republicans lie, stall, obstruct, refuse to negotiate, refuse to govern, and somehow, it's Obama's fault. I don't understand that line of thought.

    What may be Obama's fault though, is not enough public "bluster" about the Republicans - that seems to be what people really want. Yet, it seems to me Obama's rope-a-dope strategy is beginning to show results. Reading through comments in the New York Times and other MSM, I've never seen so many posts by Republicans (or those identifying themselves as Republicans) declaring they will not be voting Republican again until the GOP purges itself of the teabagger nutjobs.

    Yes, Obama's style of extreme statesmanship can be frustrating, but it is pro-active and it is engaged.

  • walt on July 06, 2011 10:11 AM:

    June, we who gather here are very informed. We know the shape and content of the story. We know the vileness of the Republicans and the timidity of the Democrats. None of this is a secret. And none of this will matter next year if unemployment is still over 9%. Obama will not win.

    Think about this for a moment outside your own sense of right and wrong. Think what will happen to the Supreme Court. Think about the millions who depend on Medicaid. Think about a nation already hogtied by oligarchy now having a tax code dedicated to their whims. This is more important than Obama's own place in history. This is the survival of our social democracy, imperiled now by thugs and zealots. If nothing else, an engaged president would be telling his countrymen what is waiting for them. Obama? Civility must prevail above all else.

    Civility is a code that benefits the bullies in our political culture. The doyens of our discourse make sure that the bullies are respected and heard. If you complain about the bullies, you're being a "dick" as Mark Halperin put it.

    We have one president, one bully pulpit, and one chance to save our social democracy. Thanks for letting Obama off the hook because I'm sure Dennis Kucinich will be happy to fill the breach.

  • June on July 06, 2011 10:48 AM:

    Walt, where does your assumption that Obama's overreaching priority is a second term come from? And you're also off-base with your assumption that I'm not myself a long-time poster of the "we who gather here." As for "knowing the shape and content of the story," reading through the comments every day, I still see a lot of the same old misinformation, along with a persistent lack of understanding of how the legislative process works.

    "Think what will happen to the Supreme Court. Think about the millions who depend on Medicaid. Think about a nation already hogtied by oligarchy now having a tax code dedicated to their whims."

    I am thinking about that, Walt. I'm thinking about how even when I visit so-called progressive websites, the majority of the comments from "progressives" seem aimed at demoralizing those who vote Democratic, and therefore we get people declaring "why bother," and sitting on their hands when it comes time to vote, hence *Speaker Boehner* and the wave of petty Republican tyrants voted into office during the mid-terms. I've said this before, but something that strikes me about the difference between those who post on Democratic-leaning websites and those who post on conservative websites - conservatives take even spectacular failures by their own and trump them up into victory. The first comments in on a Democratic website can be counted on to set a demoralizing tone, tearing down solid efforts by Democrats, picking apart even very good victories by Democrats, and again, setting an overall demoralizing tone. Why? What is actually progressive about that? Honest criticism, well-thought-out criticism, - great - even if it's scathing. But reading through these comments threads, I have to shake my head - "we" demand one hundred percent fealty to Democratic principles and the progressive base from Obama, while constantly tearing him down ourselves, and often refusing to really understand or even find out accurate information about what's going on. What is progressive about that?

    The only real bully pulpit in this day age, let's face it, is Fox News. Yes, the Prez could bluster more in public about Republicans, but that does not save democracy. Rolling up of the sleeves and doing the hard-knuckle work of negotiating enough votes to pass legislation (or defeat legislation) is largely what saves democracy. And as for your remark about The Kooch -huh? Kucinich had his moments during the Bush years, but I've considered him to be largely worse than useless since 2008. (Yes, I know that's heresy!)

  • John Wilheim on July 06, 2011 11:04 AM:

    "Dems tried to 'fix' the economy, the economy isnít soaring, ergo, Dems are wrong."
    By that logic, "Republicans tried to 'fix' the economy via the Bush tax cuts, the economy isn't soaring, Republicans are wrong."
    How come nobody ever makes the second argument, only the first?

  • bdop4 on July 06, 2011 11:45 AM:

    Yeah, Obama has been having all kinds of meetings with everyone, but what has he been telling them? From what I've been hearing from Democrats, it's all about deficit/debt reduction, a notion that should be REJECTED OUT OF HAND if the Democratic Party actually adhered to their core principles.

    JOBS is what will turn this economy around, which in turn will erase whatever existing debt/deficit we have.

    In his speeches, Obama talks about rebuilding infrastructure and focusing on emerging technologies, all while "living within our means."

    That's a pretty neat trick. I'de like to see some explanation of how the hell he plans to do it.

    The truth is this: any "savings" we can find should be applied first and foremost towards getting people BACK TO WORK. That includes retooling the labor force where needed and implementing a mentoring plan that encourages older workers to scale back so younger citizens can enter the workforce and learn from them. That would have been made a lot easier if we had single payer and took that element out of the job calculus. College grads should be given the opportunity to provide public service in exchange for elimination of student loans.

    All of this is going to take more money than we can glean from eliminating waste, even if we eliminated the wars, defense pork and corporate welfare.

    And NONE of it will happen if we persist in assisting republicans in their debt/deficit reduction scam. That won't change while Obama continues to use their messaging.

    I'de say that we were in a class war, but you need two opposing sides to have a war.

  • Holwin Wolfe on July 06, 2011 12:01 PM:

    It's like the economy is a firefighter, who needs a ladder to get to a certain floor. The Dems say, get a ladder that goes all the way up. The GOP says, no, only part way up, the full one will RUIN THE ECONOMY!!!1!!ONE!
    When the shorty ladder doesn't do the job, the Repukes scream SEE? IT DOESN'T WORK!!

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