CHRISTY ROMER ARGUES FOR THE STIMULUS.
Well, can't get a much better speech title than "So, Is It Working?" That's the question answered in Council of Economic Advisers Chair Christina Romer's speech today, and she answers it with one word: Absolutely. The speech [PDF] itself is actually a nice laymen's primer on fiscal stimulus, worth reading if you don't understand the theory behind the policy. She even deploys the now-famous antibiotics analogy, arguing that medicine still works even if it turns out a fever was worse than initially realized. (I'm actually quite curious to know who first came up with that metaphor.)
Here's perhaps the most relevant graph, demonstrating baseline unemployment and how the stimulus affected it during the second quarter of this year. Essentially, Romer says, the stimulus ensured that Americans have 485,000 more jobs than they would have otherwise, in line with predictions from economists like Mark Zandi.
Romer also trumpets the fact that private analysts all saw the stimulus adding between two and three percent to GDP growth in the past quarter, and notes that across both different countries and different U.S. states there is a correlation between stimulus funding and economic improvement.
I hope that these arguments will dispel the ignorant discussion over whether or not the stimulus is "working." It is doing exactly what economists thought it would, even if the policy wound up being executed in an economic environment that was much worse than expected. There are only two really relevant questions to debate about this program. On the Left, generally, the question is whether or not it is doing well enough. On the Right, generally, the question is whether or not the benefits are worth the costs. But no one should say the stimulus "failed."
-- Tim Fernholz
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COMMENTS (12)
Ms. Romer has a job, and she's obviously not missing a lot of meals. A lot of us, however, are unemployed and face losing our homes. So her absurd optimism about the non-stimulating stimulus flies in the face of reality and is more than a little insulting. This is the kind of tone-deafness one would expect from, well, George Bush and company. Change we can believe in? That has become a very unfunny joke.
Posted by: Bill Johnson | August 6, 2009 11:30 AM
Bill, your anecdote has roundly defeated the data. Well done.
Posted by: Zach | August 6, 2009 1:34 PM
Bill, I'd note that Romer made clear in her speech that unemployment is still a huge problem and not enough has been done, and that no amount of GDP growth matters unless we see employment recover as well.
Like it or not, though, our system of government takes a while to launch any kind of massive program, especially one that is spending nearly one trillion dollars. I don't think the government has moved fast or far enough on these issues, but I also believe you have to give the Administration fair credit for what they have done, are doing and are proposing to do going forward.
Posted by: Tim Fernholz | August 6, 2009 3:48 PM
Tim: I don’t have the luxury of time to read Ms. Romer’s speech, but during the day when I am sending emails, making calls and doing research on companies I hope will hire me – I usually have a cable news station on. And I’ve heard Ms. Romer at list six times speak in dulcet, cheery tones about how things are getting better. I’m here to tell you she, and perhaps you, have no idea how bad it is in Middle America, how despondent people are, and there’s a reason. They have no job, no visible prospect of one, they are competing against literally thousands or tens of thousands of people for a job, and the slaughter continues unabated. Are they – we—supposed to take comfort that the line at the abattoir has shortened just a little? Many economists say the layoffs have slowed not because of this so-called stimulus but because all corporate activity slows during August, including layoffs, since it’s illegal in most states to lay off people when they’re on vacation, and because frankly a lot of the HR types that give out pink slips go to Orlando and Cancun, too.
As for whether the stimulus is actually working, well, I can cite 100 economists more eminent that Ms. Romer who say no, categorically. Now I know it’s called the dismal science for a reason, but pretending that the jury is in on a recovery, especially when the job numbers tell a whole different story, is just being grossly political, or absurdly contrarian, or ignorant. Or all three.
Zach: I’m not a statistician but I’ve used data professionally for 20 years, and we both know how easy data can be manipulated to make whatever point the presenter wants to make. And I wasn’t trying to be cruel, but getting a lecture on how things are improving from a visibly overweight woman, when millions of Americans can’t afford groceries (or medicine or gasoline) is emblematic of the tone deafness I was speaking of.
I remember the darkest days of the Iraq war – total civil chaos, many Americans killed every week, Sunni-Shi’a slaughters, and car bombs every hour on the hour. A reporter would ask President Bush about it, and he’d say “We’re making good progress” (as opposed to bad progress, I guess). Well Ms. Romer’s cheery prognostications have the same, surreal and totally dishonest quality about them. I expected better from the people we elected to finally tell us the truth. The President and his minions should be ashamed.
Posted by: Bill Johnson | August 6, 2009 5:25 PM
Uh, Bill?
Did it ever occur to you how much worse things could be without the stimulus we have? Hundreds of reputable economists were saying at the time it was passed that it would likely be too small to mitigate all the effects of the past 8 years' craziness on public and private fronts, but a bunch of right-wing yahoos shouted them down.
Posted by: paul | August 6, 2009 7:51 PM
The scaled down stimulus butchered by Blue Dog Democrats and the GOP has failed.
And I suppose we'll hear outcries that unlike the first three, a fourth tax cut will send the economy on a tear?
Posted by: williamjacobs | August 6, 2009 9:17 PM
Uh, Paul?
Yes it did. But there's scant evidence to support the notion that THIS stimulus is working, and the massive and continuing loss of jobs means that even if some narrow sectors of the economy improve, millions of people - families - are being left behind, out in the cold, really. As a member of a party that purportedly cares about people, I can't sit here and support a plan, about which the empirical evidence says that it’s not working. And kindly keep in mind that unemployed people don’t buy washers and dryers. They don’t go on cruises. They don’t eat in nice restaurants…or lousy ones for that matter. They don’t buy new suits. Many of them can’t even go to the movies. And do the spending that they might do that would help lift the economy won’t happen as long as they’re out of work. And there is NO sign that these jobs will return any time soon, if at all.
So don’t lecture me on how bad it COULD have been. IT IS BAD and it’s not getting better for tens of millions of Americans.
And tell me, when I lose my house, does it help that "it could have been worse?" Foreclosed is foreclosed. Unemployed is unemployed. And a stimulus not working is, well, not working. Do you honestly think it helps if my car slows down 5 mph before it heads over the cliff?
You ought to study logic, as yours is full of holes. And you sound like a Bushie, making excuses. Feeble ones.
Posted by: Bill Johnson | August 6, 2009 9:51 PM
Bill, given the complete lack of logic in your posts, you really ought to think twice about casting stones. In particular, whether or not you lose your house has not one damn thing to do with whether the economy is recovering or not.
There actually is evidence that the stimulus has had a positive effect, regardless of your individual situation. Your "empirical evidence that it is not working" simply doesn't exist.
You want to argue that we need another stimulus? Go for it. Few here would argue with you.
Posted by: PaulB | August 6, 2009 10:53 PM
Actually, Bill, no, you can't, which is why you didn't even bother to try. Few economists are willing to state *anything* "categorically" about the stimulus at this time. It's just too soon.
Posted by: PaulB | August 6, 2009 10:56 PM
Actually, I didn't because, well, I don't work for you (sadly, I don't work for anyone else either).
If you are computer literate enough, then search for yourself. The names are there. I have to spend my time trying to get hired, thank you.
As far as logic? First you say it's working, then you and another pal say it's not working because the GOP and the Blue Dogs watered it down.
Which is it?
And I don't pretend to be an economist. I'm not sure what we "need." But I know what we "got" ain't working. I know it firsthand.
Posted by: Bill | August 7, 2009 10:14 AM
Government stimulus in Latin America and Asia has been widely credited with improvements in economies in those regions.
I don't think there is much doubt that the stimulus has improved the US economy to a degree. A 2-3% increase in GDP is a good start.
But as to the all-important Bill question -- that it won't provide a job to Bill is NOT an argument that it isn't working. Even in good times, 4-5% of the country is unemployed at any given moment.
I will have my best year ever this year -- I certainly wouldn't argue that my circumstances mean anything about the economy as a whole.
Posted by: pf | August 7, 2009 10:41 AM
First of all, you arrogant arse (pf), do you think that I am the only person out of work? This isn't about me, it's about a massive waste of money that is not bringing, and evidently will not bring jobs back to MILLIONS of Americans.
Second, President Obama promised that the stimulus would not just retain jobs, but would create them. Since his promise, millions more jobs have been shed and hundreds of thousands more are being lost each month. NONE have been created. NONE.
Also, the administration has been unable or just unwilling to provide details on the actual calculation used to come up with proof that their stimulus has even saved a single job besides a government temp job. Show me proof otherwise.
Finally, I served in harm's way in the USMC. What did you do?
Hey, I voted for this president and gave almost $500 to his campaign. I believed his and took him at his word. It's not his fault that the stimulus isn't working but he needs to come clean with the American people and set a better course. If the jobs situation is still abysmal a year from now, the GOP - even this bunch of crazies - will make a huge comeback. Then let's see what happens to the president's agenda.
Posted by: Bill | August 10, 2009 11:17 AM