The Washington Post says:
PRESIDENT OBAMA’S argument with Republicans over the effectiveness of the $862 billion American Recovery and Reinvestment Act — a.k.a., the stimulus bill — is not an easy one for him to win.
With unemployment at 9.7 percent, he has to make the counterfactual case that things would be even worse if he and congressional Democrats had not administered this dose of deficit-financed tax cuts and spending.
It does not help him that joblessness is well above what it was when the act went into effect a year ago — and higher than the administration predicted it would be after a year of stimulus.
Nevertheless, at its core, the president’s argument is correct.
You cannot inject $300 billion — an amount equal to about 2 percent of U.S. gross domestic product — into the economy without stimulating some short-run economic activity that would not have occurred otherwise.
But, the precise number of jobs that this additional demand “saved or created” – is not provable.
Nor is it simple to disentangle the Recovery Act’s impact from the trillions of dollars worth of support from other sources, mostly the Federal Reserve.
But it’s churlish to assert flatlythat “not one net job” has been created. The country is better off because of the bill.
http://www.washingtonpost.com/wp-dyn/content/article/2010/02/18/AR2010021804662.html
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Ken’s Take:
No surprise, I wasn’t a big fan of the bailouts or the fiscal stimulus program. And, suffice it to say, empirical evidence hasn’t given me any reason to jump on the wagon now.
Here’s are the key points that framesmy thinking:
- Christine Romer – chair of the President’s Council of Economic Advisers — made her academic reputation on research that convincingly proved that fiscal stimulus doesn’t work. Her recent conversion makes me a tad suspicious, to say the least.
- Adding almost $1 trillion to the national debt — the price tag of the stimulus when all the dust settles — is simply a transfer of resouces out of the private sector (eventually) to the public sector (now). In other words, there will be a subsequent depressing effect on the economy.
- A big chunk of the stimulus money (around $120 billion) went to extending unemployment benefits, food stamps, etc. On one hand, I’m ok with helping folks in tough times. On the other hand, is it any surprise that the BLS reports record numbers of unemployed people who have stopped looking for work. It’s called moral hazard, and economists have written about it for decades.
- About 1/3 of the stimulus was “tax relief for 95% of workers”. That’s true (I guess), but what was it? Obama’s $400 rebate checks. First, evidence seems to suggest that many folks used the money to pay off bills – that’s certainly not stimulative. And, I don’t understand why taxpayers (like me) should be paying off somebody else’s overextended credit card balance. Even if you look at the tax rebate as a stimulant, how much stimulating can a person do with an extra buck-a-day in their wallet?
- Another chunk of the stimulus actually went towards jobs. As near as I can tell, about 3/4 of that (around $150 billion) went to preserving the jobs of government workers in states and locales that were spending way beyond their means. Again, why should folks from fiscally responsibile places bail out some irresponsible local governments, fund marginal teachers hanging on (maybe they should be fired), and preserve bloated government bureaucracies? I don’t get it.
- Now, we’re down to the spending on things like roads and bridges and turtle crossings and fast trains between Disneyland and the Mirage (about $50 billion in total). Even if those are all good things , the administrtion’s numbers say that the bill is over $100,000 for each associated job. Give me a break.
- Finally, they said: “Give us $787 billion and we’ll keep unemployemnt uner 8%”. They didn’t do it. Period. Don’t give me “jobs saved or created” — they set the metric and failed to achieve it.
That’s my POV …
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