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One of the more unsatisfying political fights in America is over whether the 2009 stimulus “worked.” The debate itself is mind-numbing, in large part because there’s no way to win when the truth — it could have been worse — is something no one wants to hear.
Was the effort successful? In so far as it prevented a calamity, of course it was — the stimulus took an economy that was shrinking and made it grow; it took an economy that was hemorrhaging jobs and created conditions in which it created jobs. There are millions of Americans working today who’d be unemployed were it not for the Recovery Act.
And yet, it was terribly unsuccessful insofar as the economy still stinks and the jobs crisis hasn’t gone away.
With this in mind, Ezra Klein had a really terrific piece of work over the weekend, going into detail on the nature of the recession, how and why administration officials made the decisions they did, and just how impossibly difficult the circumstances were (and are).
It’s tough to excerpt from a 6,600-word feature piece — I do hope folks will set aside some time to simply read it — but let’s take note of some of the highlights. Ezra notes the seemingly-insurmountable hurdles facing the Obama administration before the president was even sworn into office, including the fact that they were relying on information that turned out to be wrong — they were told the U.S. economy was shrinking quickly, when it fact, the contraction was already at catastrophic levels.
The Bureau of Economic Analysis, the agency charged with measuring the size and growth of the U.S. economy, initially projected that the economy shrank at an annual rate of 3.8 percent in the last quarter of 2008. Months later, the bureau almost doubled that estimate, saying the number was 6.2 percent. Then it was revised to 6.3 percent. But it wasn’t until this year that the actual number was revealed: 8.9 percent. That makes it one of the worst quarters in American history. Bernstein and Romer knew in 2008 that the economy had sustained a tough blow; t hey didn’t know that it had been run over by a truck.
This contributed to an inadequate response, compounded by political circumstances that prevented a more ambitious stimulus and a second bite at the apple, which some in the administration falsely assumed would be a possibility.
Ezra also explains related developments that interfered with the recovery — the European debt crisis and oil market swings are described as “aftershocks” — including the limited options in dealing with the housing crisis, massive public-sector layoffs that acted as a counter-stimulus, and the very nature of a recession caused by a financial crisis, which is altogether different from a cyclical crisis in duration and severity.
In the bigger picture, though, after reading Ezra’s piece, I’m left with two related thoughts. The first is Republican critics of the administration’s efforts have been so wrong, they deserve to be laughed out of the room — any room. Every GOP instinct since the start of the recession in 2007 has been entirely backwards, and the fact that they’re strutting around in 2011, as if the high unemployment rate somehow lends credence to their twisted economic worldview, borders on criminal. If Republicans weren’t permanently discredited by the crash itself, their hilariously wrong responses to the downturn should remove any doubt about their intellectual bankruptcy and ruined credibility.
Second, as bad as things are right now, I’m reminded how much better off the nation is thanks to the unappreciated efforts. One of the more important and accurate economic analyses — the Rogoff/Reinhart research that Ezra highlights — projected that unemployment in 2011 would reach between 11% and 12%. That didn’t happen, not because Rogoff and Reinhart were wrong, but because of the efforts Democrats took.
Faced with impossible circumstances, a broken political system, and a fickle and impatient public, the Obama administration managed to prevent an extraordinary crisis. It wasn’t enough to create a robust recovery, and the American public is largely convinced the efforts were a horrible failure, but for those who care about the details, aggressive government action prevented a nightmare.
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hornblower on October 10, 2011 11:47 AM:
I find it amazing that the unemployment rate has held firm at around 9% for so long. This indicates that the decisions made in the crisis put a floor under the worst possibilities. Actually, there is a bow to be taken for this result but no one wants to laud high unemployment.
Rachel on October 10, 2011 11:53 AM:
"...Republican critics of the administration’s efforts have been so wrong, they deserve to be laughed out of the room — any room. ... If Republicans weren’t permanently discredited by the crash itself, their hilariously wrong responses to the downturn should remove any doubt about their intellectual bankruptcy and ruined credibility."
This is where the President's and the Democratic Party's own response has been "criminal." If they had defended their own actions and fought back forcefully against the entire conservative dogma that led us to this disaster, the "shellacking" of 2010 might never have taken place, and we might actually have laid the groundwork for some progress today. Instead, they let the Republicans ruin the country -- AGAIN.
adjouir on October 10, 2011 11:54 AM:
@Steve - Thanks for having the courage to write this. Many of us know that people don't like giving the Obama administration credit for what they've done economically, including most of the Democratic Party. Perhaps you can spend some time today sending this information to your "Liberal" and "Progressive" friends who complain nonstop about what Obama is "not doing". But I'm sure they wouldn't pay attention to it anyway. After all, they (like the Republicans) don't care about facts. All they know how to do is "take up" a new "Obama sucks" narrative each week. It serves them well.
Ron Byers on October 10, 2011 11:59 AM:
The problem Steve is that few alive today have ever experienced a real depression. Most people have only experienced recessions. They don't understand that a real depresssion, which we narrowly averted, would result in real hunger and sever deprivation. My mother used to talk about one dress a year and missing lots of meals. She had to move in with family members who were better off than her parents.
We aren't recovering from the Great Recession as fast as we all would like so a lot of people blame Obama and his policies. I think it is pretty clear that what Bush and Obama did as the Great Recession took hold saved us from a genuine depression. A lot of people lost thier jobs and their homes, but nobody missed meals. The average person just doen't have the frame of reference to understand that.
Anonymous on October 10, 2011 12:10 PM:
To expand a little, the Great Recession seems to have made apparent fundamental changes that have been happening for decades. It occured as the middle class ran out of money, but the middle class has been under severe pressure for a long time. We live in a consumer society, as the middle class has watched as take home pay has remained flat while productivity has skyrocketed, rendering millions of middle class people unnecessary, the number of consumers has dropped signficantly. Given that more workers aren't needed to take up any lag in production, it doesn't seem our situation is going to improve anytime soon.
We need to find a way to distribute money to the middle class consumers. One way might be to force companies to pay dividends. Another way might be to reduce the work week to 4 days, forcing employers to hire more workers.
Nobody is really talking about what we need to do to expand the consumer base. That is the conversation we need to be having.
Ron Byers on October 10, 2011 12:13 PM:
Anonymous at 12:10 PM was me.
DAY on October 10, 2011 12:36 PM:
Sorry, Ron, but any "forcing" by government doesn't work- i.e.,wage and price controls- and is pretty much anathema to our beliefs in a free society. Good idea, though.
Speaking of beliefs, facts usually meet their match when attempting to sway those who hold opposite tenets. Religion, for example.
You write that "We need to find a way to distribute money to the middle class consumers". Exactly; consumer demand will pull us out of our current situation.
Since interest rates are virtually zero, the government needs to do what private enterprise will not/can not do:
An American Marshall Plan to re-build the nation's infrastructure. And Obama can sell it (already has) by mentioning Lincoln's rail road and land grant college program, and Eisenhower's Interstate.
But i am preaching to the choir. . .
Equal Opportunity Cynic on October 10, 2011 12:38 PM:
I guess the silver lining is, if the public buys the bizarre sales pitch from the people doing everything to make the recession worse, so that the GOP wins everything meaningful in 2012, there won't be any doubt who's to blame for the economic shambles by 2014. How much democracy we'll have left to do something to fix it in 2014 might be an open question.
Ron Byers on October 10, 2011 12:57 PM:
Day the five day week is only a century or so old. It was forced on employers by someone back in the day. You can push corporations to pay dividends via the tax laws. Right now corporations are spending way too much on executive salaries and far too little on dividends. I continually hear "we can't pay dividends because we have to pay dividends out of after tax dollars" from my company's executive team.
Anyway if we don't do something to deal with the new reality we will continue to slide down the drain.
Dredd on October 10, 2011 1:13 PM:
The "things" that make it "work" are coming down to 1 "thing".
DAY on October 10, 2011 1:21 PM:
"It was forced on employers by someone back in the day."
That someone was unions. And the 8 hour day, and lots of other things we take for granted today.
I agree that the government CAN make tax laws, but since "the government' is made up of (elected) politicians, it ain't gonna happen until we elect those who will.
Lets all hope the OWS becomes the Great Awakening. And soon.
JW on October 10, 2011 1:23 PM:
The very institutions whose greed and irresponsibility necessitated "aggressive government action" not only refuse to acknowledge their near death experience, but have chosen shock doctrines tactics to further their choke hold on future economic decision making.
Rachel put it well up-thread: "This is where the President's and the Democratic Party's own response has been "criminal." If they had defended their own actions and fought back forcefully against the entire conservative dogma that led us to this disaster, the "shellacking" of 2010 might never have taken place, and we might actually have laid the groundwork for some progress today. Instead, they let the Republicans ruin the country -- AGAIN".
Had intelligent, belligerent rhetoric been wielded as a political weapon, the GOP might well today be crippled. It wasn't, because this generation's democratic leadership is largely simpatico with republican theories of governance. When the chips were down the administration proved unwilling to marshal political rhetoric because it would have meant attacking themselves. They were Kumbaya conspirators, and pissed away the opportunity the party's rank and file had handed them in 2008.
Of course, that won't stop them from doing so, now that we've entered countdown in another election cycle.
zandru on October 10, 2011 1:51 PM:
Higher corporate tax rates drive greater investment by businesses, including more hiring.
If the government takes a bigger cut of the "profits", companies have an incentive to decrease their "profits" - by spending more of their surpluses on "growing the business", etc. It also decreases the temptation to just spin off their excess earnings into bloated executive salaries, which create or build nothing.
If you look at the last 30 or so years, higher corporate/wealthy tax rates have resulted in higher employment. As these tax rates are decreased, unemployment increases.
Incredibly, the rich do better when heavily taxed. They're just too stupid to realize it.
Tanya on October 10, 2011 2:12 PM:
Their many problems these last 2.5 yrs. with the messaging & perception of the Obama administion, IMO, it was not that PBO stimulus didn't work, it was that congress compromise to please others in their party (blu-dog dem.) & Pres. signed it because he & his economic team knew that something had to be done quickly... The Auto bailout was done by this administion without support from his dem. cacsus, PL, Mr. Klein, and the so-called Mr. Obama supporters. Same could be said for fin. ref., the proposal congress water it down to satisfy members to vote for it (S. Brown, O. Snowe) & some members of the dem. senate till voted against it (B. Nelson), BP disaster once again dem. came out against him (Pres. Obama) ex. M. Landier, Carville etc. & were spreaded all over the cable media, local newspapers... The false outrage with the speech about Israeli every member in congress stood & applauded a foreign dignitary which turn out to agreed with the Pres. in the long run. And the people who were his base was MIA so, right-wing to control of the media.. Now the Pres. is till fighting and whats happening? The dems. in congress is tinking his AJA bill to passed the senate, his so-called base are out their complaining but not calling out the real corrputers (and that includes dems. as well)... He asking for the American people help, some not all are letting their voices be heard & the other 1/2 are MIA, Dem. congress are so ready to blame the man in the WH (M. Water, B. Sanders, Cleves) & media are carry the repubs. water...
Now the media & some of so call Obama suporters are giving these loonies repubs. some serious consideration.. Where their shouldn't be.. They should be out their calling them out every time they're face show-up on tv or paper...
And before you ask me what am I doing? I live in the loonie world of Texas but I'm member of turn Texas Blue, which is hard but that don't stop us from fighting, donating, calling, registering, spreading the word about the changes that the repubs. & some dems. are doing to our voting rights, etc...
Redshift on October 10, 2011 2:25 PM:
Incredibly, the rich do better when heavily taxed. They're just too stupid to realize it.
I suspect, if you interviewed many of them on that point, they are not too stupid to realize it. They might well admit that the rich overall would be better off, but almost every one of them would be equally certain that they personally are the exception to the rule, and make more profitable decisions without that pressure.
Redshift on October 10, 2011 2:27 PM:
The one rule of American political media is that no conservative can ever be so wrong or so extreme that they will not be invited on TV and treated as a credible opinion.
jjm on October 10, 2011 3:15 PM:
Thought this might amuse people: when an actor tells it like it is. (Cited on Think Progress this morning):
George Clooney:
"I'm disillusioned by the people who are disillusioned by Obama, quite honestly, I am," "Democrats eat their own. Democrats find singular issues and go, 'Well, I didn't get everything I wanted.' I'm a firm believer in sticking by and sticking up for the people whom you've elected.
"If he was a Republican running, they'd be selling him as the guy who stopped 400,000 jobs a month from leaving the country. They'd be selling him as the guy who saved the auto-industry. If they had the beliefs, they'd be selling him as the guy who got rid of 'Don't Ask, Don't Tell,' who got Osama bin Laden. You could be selling this as a very successful three years."
"I'm angered at the polarization," he said. "Having growing up around television news, I'm angered at the way things are presented. I'm worried about the content. I'm worried about who's minding the store, and I'm worried about the idea that 24-hour news doesn't mean we get more news, it just means we have this repetitive cycle of things that aren't factually accurate."
Crissa on October 10, 2011 3:22 PM:
I swear, talking with a Republican is like talking to someone from backwards-world. They're mad we wanted to close the windows and tossed a log on the fire when the cold front came running in; and now they're blaming the room still being cold because we put insufficient logs on the fire - but their plan is to open the windows again while it's still cold out. Of course it's cold, you asshats, but we put a log on the fire: It could be colder.
jdb on October 10, 2011 3:43 PM:
Now, please turn your attention to Krugman, who (surprise surprise) isn't so generous: "There’s certainly a lot to Ezra’s thesis. Yet I think he lets Obama and company off the hook too much." etc. etc.
Don't know whether or not Klein has responded, but I wish that somebody would.