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New book shows that the stimulus worked - really, really well

shira

Diamond Member
Jan 12, 2005
9,567
6
81
Righties look at the current state of the economy and claim slow growth and high unemployment "proves" that the stimulus didn't work. Of course, in order to validly make that claim they must be able to credibly show what the state of the economy would be right now if there had been no stimulus. A just-published book- "The New New Deal" - by reporter Michael Grunwald looks quite a bit deeper than right- or left-wing talking points and concludes that the stimulus:

  • was responsible for saving and creating 2.5 million jobs.
  • helped the economy grow by as much as 3.8 percent, and kept the unemployment rate from reaching 12 percent
  • made crucial investments in neglected economic sectors that are likely to pay off for decades
But of course righties know that the stimulus was a failure because, . . . , well, they just know.

From the book's introduction:

I worked for nine years in Washington as a national reporter the "The Washington Post," mostly writing critical stories about dysfunctional government agencies. I was familiar with the city's groupthink, the way its media narratives can harden into conventional wisdom. But I didn't live in Washington anymore, so I didn't swim in circles where suggesting that the stimulus was anything but a joke was a sign of credulity and cluelessness. And I still write about domestic policy, so I knew that the Recovery Act was more than the honeybee insurance, contraception subsidies, and other porky-sounding line items that go so much airtime on TV. It seemed like a big deal - actually, a collection of big deals. I didn't know if it was a good deal, but it reminded me of the New Deal, a mammoth government effort aimed at short-term Recovery and long-term Reinvestment.

I spent two years researching the stimulus, and I found that it is a new New Deal. Much of the Recovery Act's impact has been less obvious then the original New Deal's, but it's just as real.
.
.
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The leading independent economic forecasters - firms like Macroeconomic Advisers, Moody's Economy.com, IHS Global Insight, J.P. Morgan Chase, and Goldman Sachs, as well as the nonpartisan Congressional Budget Office - all agree that the stimuls helped to stop the bleeding, averting a second depression and ending a brutal recession. The Recovery Act wasn't the only government intervenstion that helped stabilize the patient. The Federal Reserve's emergency support for the financial sector, Obama's unpopular rescue of the auto industry, and the even less popular Wall Street bailout that began under Bush all helped keep the economy afloat. But on the job loss graphs from the Great Recession, the low point came right before stimulus dollars started flowing. Then the situation slowly began to improve.
A note on his sources:

I've been harsh on media coverage of the stimulus, but I still relied heavily on the reporting of great national newspapers like the New York Time, the Washington Post, and the Wall Street Journal, as well as Washington watchdogs like Politico, Roll Call, ProPublica, and Congressional Quarterly. I also consulted The New Yorker, The New Republic, The Atlantic, The Economist, Slate, and of course the work of my colleagues at Time. I often learned a lot from websites like Talking Points Memo, Daily Kos, the Huffington Post, ThinkProgress and ClimateProgress on the left, or National Review's The Corner and RedState on the right; even for source materials that aren't solely on the internet, I've tried to include links whenever possible.

And a review in the New York Times

http://www.nytimes.com/2012/09/16/opinion/sunday/dont-tell-anyone-but-the-stimulus-worked.html?_r=1&src=recg

Republicans howled on Thursday when the Federal Reserve, at long last, took steps to energize the economy. Some were furious at the thought that even a little economic boost might work to benefit President Obama just before an election. “It is going to sow some growth in the economy,” said Raul Labrador, a freshman Tea Party congressman from Idaho, “and the Obama administration is going to claim credit.”

Mr. Labrador needn’t worry about that. The president is no more likely to get credit for the Fed’s action — for which he was not responsible — than he gets for the transformative law for which he was fully responsible: the 2009 stimulus, which fundamentally turned around the nation’s economy and its prospects for growth, and yet has disappeared from the political conversation.

The reputation of the stimulus is meticulously restored from shabby to skillful in Michael Grunwald’s important new book, “The New New Deal.” His findings will come as a jolt to those who think the law “failed,” the typical Republican assessment, or was too small and sloppy to have any effect.

On the most basic level, the American Recovery and Reinvestment Act is responsible for saving and creating 2.5 million jobs. The majority of economists agree that it helped the economy grow by as much as 3.8 percent, and kept the unemployment rate from reaching 12 percent.

The stimulus is the reason, in fact, that most Americans are better off than they were four years ago, when the economy was in serious danger of shutting down.

But the stimulus did far more than stimulate: it protected the most vulnerable from the recession’s heavy winds. Of the act’s $840 billion final cost, $1.5 billion went to rent subsidies and emergency housing that kept 1.2 million people under roofs. (That’s why the recession didn’t produce rampant homelessness.) It increased spending on food stamps, unemployment benefits and Medicaid, keeping at least seven million Americans from falling below the poverty line.

And as Mr. Grunwald shows, it made crucial investments in neglected economic sectors that are likely to pay off for decades. It jump-started the switch to electronic medical records, which will largely end the use of paper records by 2015. It poured more than $1 billion into comparative-effectiveness research on pharmaceuticals. It extended broadband Internet to thousands of rural communities. And it spent $90 billion on a huge variety of wind, solar and other clean energy projects that revived the industry. Republicans, of course, only want to talk about Solyndra, but most of the green investments have been quite successful, and renewable power output has doubled.

Americans don’t know most of this, and not just because Mitt Romney and his party denigrate the law as a boondoggle every five minutes. Democrats, so battered by the transformation of “stimulus” into a synonym for waste and fraud (of which there was little), have stopped using the word. Only four speakers at the Democratic convention even mentioned the recovery act, none using the word stimulus.

Mr. Obama himself didn’t bring it up at all. One of the biggest accomplishments of his first term — a clear illustration of the beneficial use of government power, in a law 50 percent larger (in constant dollars) than the original New Deal — and its author doesn’t even mention it in his most widely heard re-election speech. Such is the power of Republican misinformation, and Democratic timidity.

Mr. Grunwald argues that the recovery act was not timid, but the administration’s effort to sell it to the voters was muddled and ineffective. Not only did White House economists famously overestimate its impact on the jobless rate, handing Mr. Romney a favorite talking point, but the administration seemed to feel the benefits would simply be obvious. Mr. Obama, too cool to appear in an endless stream of photos with a shovel and hard hat, didn’t slap his name on public works projects in the self-promoting way of mayors and governors.

How many New Yorkers know that the stimulus is helping to pay for the Second Avenue subway, or the project to link the Long Island Rail Road to Grand Central? Almost every American worker received a tax cut from the act, but only about 10 percent of them noticed it in their paychecks. White House economists had rejected the idea of distributing the tax cuts as flashy rebate checks, because people were more likely to spend the money (and help the economy) if they didn’t notice it. Good economics, perhaps, but terrible politics.

From the beginning, for purely political reasons, Republicans were determined to oppose the bill, using silly but tiny expenditures to discredit the whole thing. Even the moderate Republican senators who helped push the bill past a filibuster had refused to let it grow past $800 billion, and prevented it from paying for school construction.

Republicans learned a lesson from the stimulus that Democrats didn’t expect: unwavering opposition, distortion, deceit and ridicule actually work, especially when the opposition doesn’t put up a fight. The lesson for Democrats seems equally clear: when government actually works, let the world know about it.
 

DominionSeraph

Diamond Member
Jul 22, 2009
8,391
31
91
What hogwash. We all know that under McCain/Palin we would all be living in million dollar mansions with supermodel girlfriends, living in bliss until we were Raptured into heaven. It is only the evil Democrats trying to make everyone poor that has prevented this.
 

Matt1970

Lifer
Mar 19, 2007
12,320
2
0
http://www.foreignpolicy.com/articles/2012/07/23/how_republicans_sabotaged_the_recovery?page=0,1

At the University of Chicago's Graduate School of Business, the Initiative on Global Markets launched a forum to poll economists on some of the biggest issues in economic policy. It brought together a panel of more than 40 top academics from both sides of the political divide, including members of the Council of Economic Advisers from the presidencies of George H. W. Bush, Bill Clinton, George W. Bush, and Obama. As four panelists wrote in an editorial for Bloomberg News, they wanted to dispel "a common belief that economists can't agree on anything important." The forum, they said, "provides an introduction to the half-century of fact-based research that informs the scholars' opinions."

In 2012, the panel was asked about the stimulus bill that the Democrats pushed through Congress against the Republicans' vocal opposition. Each panelist could agree or disagree with the following statement: "Because of the American Recovery and Reinvestment Act of 2009, the U.S. unemployment rate was lower at the end of 2010 than it would have been without the stimulus bill." Ninety percent of the panel said they agreed or strongly agreed. Then they were asked if the benefits of the stimulus would end up exceeding its costs -- not an essential aspect of a stimulus package, since the goal of stimulus is to borrow growth from the future to smooth out a rough spot in the present. Still, 46 percent agreed or strongly agreed, and most of the rest said the result was uncertain; only 12 percent disagreed or strongly disagreed.
They could only get 46% of the economists to agree the money spent on the stimulus was even worth it. It was a stimulus that takes 10 years to pay out, like sprinkling water on a forest fire, was followed up by a President waging class warfare, threatening to raise taxes on corporations and the rich in the middle of a recession, and stuffs Obamacare down our throats. That sure builds consumer confidence. I am surprised the stimulus had the effects it did.
 

Moonbeam

Elite Member
Nov 24, 1999
67,599
4,242
126
Righties look at the current state of the economy and claim slow growth and high unemployment "proves" that the stimulus didn't work. Of course, in order to validly make that claim they must be able to credibly show what the state of the economy would be right now if there had been no stimulus. A just-published book- "The New New Deal" - by reporter Michael Grunwald looks quite a bit deeper than right- or left-wing talking points and concludes that the stimulus:

  • was responsible for saving and creating 2.5 million jobs.
  • helped the economy grow by as much as 3.8 percent, and kept the unemployment rate from reaching 12 percent
  • made crucial investments in neglected economic sectors that are likely to pay off for decades
But of course righties know that the stimulus was a failure because, . . . , well, they just know.

From the book's introduction:



A note on his sources:




And a review in the New York Times

http://www.nytimes.com/2012/09/16/opinion/sunday/dont-tell-anyone-but-the-stimulus-worked.html?_r=1&src=recg
It seems to me that Obama's strategy has been to just keep making the right decisions and pushing for them and in the long run the people will see it without having to be told and re-elect him. It's a bad idea to me, but it may just work especially now that others are doing the job. Of course, it helps a lot when the folk you are running against are antiAmerican and basically insane. You have to admit though, they have brass.
 
Jan 25, 2011
16,177
7,766
146
http://www.foreignpolicy.com/articles/2012/07/23/how_republicans_sabotaged_the_recovery?page=0,1



They could only get 46% of the economists to agree the money spent on the stimulus was even worth it. It was a stimulus that takes 10 years to pay out, like sprinkling water on a forest fire, was followed up by a President waging class warfare, threatening to raise taxes on corporations and the rich in the middle of a recession, and stuffs Obamacare down our throats. That sure builds consumer confidence. I am surprised the stimulus had the effects it did.
Didn't you miss the part where that's 4 times the number that disagreed. Only 12%
 

IGBT

Lifer
Jul 16, 2001
17,744
53
91
http://www.cnbc.com/id/49029923

“If I had messed up as badly as Bernanke I would for sure resign. The mandate of the Fed to boost asset prices and thereby create wealth is ludicrous — it doesn’t work that way. It’s a temporary boost followed by a crash,” Faber said.

“QE helps rich people whose asset prices go up and whose net worth then increases but it doesn’t flow to the man on the street who is faced with higher costs of living with price rises. You just have a small economy that is booming but the majority of the economy is damaged by QE,” he said.
 
Oct 16, 1999
10,490
3
0
Didn't you miss the part where that's 4 times the number that disagreed. Only 12%
Also, economically "worth it" means did we get $1+ of economic growth for every $1 of stimulus cost (basically a positive multiplier effect). Yes or no, we got growth now that would not have otherwise happened that may or may not cost us more than that over the long run (negative multiplier). Faster growth in a recession vs. possible slower growth over the long term is a worthwhile trade off even if it isn't "economically" worth it. People can't just keep putting their lives on hold to wait for the economy to get better. Hell, that just prolongs the recession.
 
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Jhhnn

No Lifer
Nov 11, 1999
62,364
14,616
136
http://www.cnbc.com/id/49029923

“If I had messed up as badly as Bernanke I would for sure resign. The mandate of the Fed to boost asset prices and thereby create wealth is ludicrous — it doesn’t work that way. It’s a temporary boost followed by a crash,” Faber said.

“QE helps rich people whose asset prices go up and whose net worth then increases but it doesn’t flow to the man on the street who is faced with higher costs of living with price rises. You just have a small economy that is booming but the majority of the economy is damaged by QE,” he said.
So it's trickledown, right?
 

blackangst1

Lifer
Feb 23, 2005
21,094
879
126
Whew thank God. With high unemployment and $16 Trillion in debt I thought it had failed!
 

Hayabusa Rider

Admin Emeritus & Elite Member
Jan 26, 2000
50,872
4,214
126
Imagine something that changed the real issues of employment and depressed wages had been done. Well I suppose it accomplished its goals. Panem!
 

shira

Diamond Member
Jan 12, 2005
9,567
6
81
Whew thank God. With high unemployment and $16 Trillion in debt I thought it had failed!
Read my original post. Your so-called "argument" is like claiming "the treatment failed" if someone diagnosed with pancreatic cancer still has cancer six years later (but is still alive).
 

shira

Diamond Member
Jan 12, 2005
9,567
6
81
Imagine something that changed the real issues of employment and depressed wages had been done. Well I suppose it accomplished its goals. Panem!
The problem with your point is that you're ASSUMING that there was "something" that could have been done (and more importantly, something that was actually politically possible) that would have led to an economy significantly better than what we have now.
 

cybrsage

Lifer
Nov 17, 2011
13,021
0
0
Read my original post. Your so-called "argument" is like claiming "the treatment failed" if someone diagnosed with pancreatic cancer still has cancer six years later (but is still alive).
The problem with your point is that you're ASSUMING that there was "something" that could have been done (and more importantly, something that was actually politically possible) that would have led to an economy significantly better than what we have now.

If the treatment claimed it would cure the cancer, then everyone should agree it failed. If there is no cure for cancer, then no treatment should claim it will cure cancer.

Obama claimed he would fix things AND reduce the deficit by half or he should be considered a one term President. Since his treatment did not do what he claimed it would, we can and should call it a failure.
 

Tom

Lifer
Oct 9, 1999
13,293
1
76
Whew thank God. With high unemployment and $16 Trillion in debt I thought it had failed!
both would have been much worse if the trajectory of the economy under Bush policies had continued. Which apparently is where Romney wants to go back to.

the leading cause of the increased debt isn't the stimulus, its the slow economy.

and as time goes on the Bush tax cuts will mushroom the debt to truly astronomical numbers.
 

Paratus

Lifer
Jun 4, 2004
15,044
8,836
146
The problem with your point is that you're ASSUMING that there was "something" that could have been done (and more importantly, something that was actually politically possible) that would have led to an economy significantly better than what we have now.
Of course their was! We could have raised taxes on the bottom 50% who don't pay any,(tsst I said any lalalalalala - finger in ears - any taxes at all) so they have skin in the game. Then we could get rid of the estate tax and capital gains to provide stability for the poor job creators who's profit has been unfairly hampered by this recession.
 

blackangst1

Lifer
Feb 23, 2005
21,094
879
126
both would have been much worse if the trajectory of the economy under Bush policies had continued. Which apparently is where Romney wants to go back to.

the leading cause of the increased debt isn't the stimulus, its the slow economy.

and as time goes on the Bush tax cuts will mushroom the debt to truly astronomical numbers.
Is that so? How would reversing the Bush tax cuts create jobs in the private sector?
 

Fern

Elite Member
Super Moderator
Sep 30, 2003
26,907
173
106
I haven't read the book. I wonder if some who has can tell me whether study also examined the costs of the stimulus. So often it seems these things focus on only one side of the equation, and in the portion the OP quoted this appears to focused on only the positives.

But the stimulus was not 'free'. At the time the stimulus was discussed concerns were raised about the govt absorbing so much capital (in borrowing) that businesses and the private sector might have liquidity trouble. There is ample evidence in professional literature that is indeed the case, however it is unclear how much of this is attributable to the stimulus.

Additionally, economists have identified debt as a drag on GDP, in some cases very long lasting:

We identify the major public debt overhang episodes in the advanced economies since the early 1800s, characterized by public debt to GDP levels exceeding 90% for at least five years. Consistent with Reinhart and Rogoff (2010) and other more recent research, we find that public debt overhang episodes are associated with growth over one percent lower than during other periods. Perhaps the most striking new finding here is the duration of the average debt overhang episode. Among the 26 episodes we identify, 20 lasted more than a decade. Five of the six shorter episodes were immediately after World Wars I and II. Across all 26 cases, the average duration in years is about 23 years. The long duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions. The long duration also implies that cumulative shortfall in output from debt overhang is potentially massive. We find that growth effects are significant even in the many episodes where debtor countries were able to secure continual access to capital markets at relatively low real interest rates. That is, growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest rates.
http://papers.nber.org/papers/w18015

Fern
 

shira

Diamond Member
Jan 12, 2005
9,567
6
81
If the treatment claimed it would cure the cancer, then everyone should agree it failed. If there is no cure for cancer, then no treatment should claim it will cure cancer.

Obama claimed he would fix things AND reduce the deficit by half or he should be considered a one term President. Since his treatment did not do what he claimed it would, we can and should call it a failure.
You're arguing that the stimulus didn't spark a recovery as strong as Obama claimed back in 2009 it would. That's completely different from arguing that "the stimulus failed."

But you go right on side-tracking the discussion. That's your specialty.
 

shira

Diamond Member
Jan 12, 2005
9,567
6
81
Of course their was! We could have raised taxes on the bottom 50% who don't pay any,(tsst I said any lalalalalala - finger in ears - any taxes at all) so they have skin in the game. Then we could get rid of the estate tax and capital gains to provide stability for the poor job creators who's profit has been unfairly hampered by this recession.
And where's the economic model - backed by a majority of mainstream economists - that agrees with this assessment?

It's sure easy to make extravagant claims backed up by essentially nothing.
 

Dulanic

Diamond Member
Oct 27, 2000
9,862
465
136
You're arguing that the stimulus didn't spark a recovery as strong as Obama claimed back in 2009 it would. That's completely different from arguing that "the stimulus failed."

But you go right on side-tracking the discussion. That's your specialty.
They want to pretend we could magically get back to a bubble inflated economy running on voodoo math. Anything less than this is a failure... until we have a republican with the same economy numbers, then he did the best possible with the situation and no one could have done better.
 

blackangst1

Lifer
Feb 23, 2005
21,094
879
126
You're arguing that the stimulus didn't spark a recovery as strong as Obama claimed back in 2009 it would. That's completely different from arguing that "the stimulus failed."

But you go right on side-tracking the discussion. That's your specialty.
I cant speak for cyber, but I think the phrase "worked really, really well" is a bit generous. Did it prevent an even worse scenario had it not been done? Of course. Was it necessary? IMHO yes. Our situation without the bailouts would have crippled ours, and alot of the world's, economies, possibly beyond repair. But to say it worked really, really well is hardly true.
 

shira

Diamond Member
Jan 12, 2005
9,567
6
81
They want to pretend we could magically get back to a bubble inflated economy running on voodoo math. Anything less than this is a failure... until we have a republican with the same economy numbers, then he did the best possible with the situation and no one could have done better.

And they also want to change the topic of the discussion. The book - and my OP - are clearly judging the stimulus on the basis of what it accomplished with respect to unemployment, current economic growth, and future economic growth, relative to what would have happened without the stimulus. On that basis, it's clear that the stimulus worked very well indeed.

But cybrsage doesn't want to address that analysis, because he knows that he has no credible counter to it. Instead, he wants to pretend that the title of this thread is "Did the stimulus accomplish as much as Obama claimed it would?"
 

shira

Diamond Member
Jan 12, 2005
9,567
6
81
I cant speak for cyber, but I think the phrase "worked really, really well" is a bit generous. Did it prevent an even worse scenario had it not been done? Of course. Was it necessary? IMHO yes. Our situation without the bailouts would have crippled ours, and alot of the world's, economies, possibly beyond repair. But to say it worked really, really well is hardly true.
Okay, that's a fair criticism.

But neither you nor I know what "really, really well" actually means in the context of the Great Recession. Because we don't know what type of recovery was actually possible. If our current economy is about as good as it was possible to achieve under any economic strategy that could have been put in place, then "the stimulus was outstandingly effective" would be accurate. On the other hand, if there were other strategies (and by that I means strategies analyzed by a range of economists) that a majority of economists agree would have led to a lot better current and future economy than we have now - and which were politically possible in 2009, then "the stimulus was somewhat effective" would be accurate. But I haven't seen ANY competing strategy that's been given high marks.
 

Hayabusa Rider

Admin Emeritus & Elite Member
Jan 26, 2000
50,872
4,214
126
The problem with your point is that you're ASSUMING that there was "something" that could have been done (and more importantly, something that was actually politically possible) that would have led to an economy significantly better than what we have now.
I've outlined my "platform" if you will. If I had the backing of a political party the strength of the Democrats with the same will shown as with Obamacare then all that remains is why it would not have worked. The only reason I see is that the Democrats would oppose real reform too. Creating carrots and sticks for domestic jobs, increasing boardroom accountability to a larger portion of stock holders who aren't beholden to other boards and such. Are those things Dems would oppose? Why?
 

Jhhnn

No Lifer
Nov 11, 1999
62,364
14,616
136
I haven't read the book. I wonder if some who has can tell me whether study also examined the costs of the stimulus. So often it seems these things focus on only one side of the equation, and in the portion the OP quoted this appears to focused on only the positives.

But the stimulus was not 'free'. At the time the stimulus was discussed concerns were raised about the govt absorbing so much capital (in borrowing) that businesses and the private sector might have liquidity trouble. There is ample evidence in professional literature that is indeed the case, however it is unclear how much of this is attributable to the stimulus.

Additionally, economists have identified debt as a drag on GDP, in some cases very long lasting:



http://papers.nber.org/papers/w18015

Fern
That's really an argument for raising taxes, but do carry on...

There is no crowding out extant today. Investors & Corporate America are awash in cash, liquidity, entirely by choice in the face of low demand.
 
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