Fantastic Summary of the Stimulus Success

[dellinger63]

Mired in excruciating negotiations over the budget and the debt ceiling, President Barack Obama might reflect that things didn't have to turn out this way. The impasse grows mainly out of one major decision he made early on: pushing through a giant stimulus.

When he took office in January 2009, this was his first priority. The following month, Obama signed the American Recovery and Reinvestment Act, with a price tag eventually put at $862 billion

It was, he said at the time, "the most sweeping economic recovery package in our history," and would "create or save 31/2 million jobs over the next two years."

The president was right about the first claim. As a share of gross domestic output, it was the largest fiscal stimulus program ever tried in this country. But the second claim doesn't stand up so well. Today, total nonfarm employment is down by more than a million jobs.

What Obama didn't foresee is that his program would spark a populist backlash and give rise to the tea party. Where would Michele Bachmann be if the stimulus had never been enacted — or if it had been a brilliant success?

To say it has not been is to understate the obvious. The administration says the results look meager because the economy was weaker than anyone realized. Maybe so, but fiscal policy is a clumsy and uncertain tool for stimulating growth, which the past two years have not vindicated.

The package had three main components: tax cuts, aid to state governments and spending on infrastructure projects. Tax cuts would induce consumers to buy stuff. State aid would prop up spending by keeping government workers employed. Infrastructure outlay would generate hiring to build roads, bridges and other public works.

That was the alluring theory, which vaporized on contact with reality. The evidence amassed so far by economists indicates that the stimulus has come up empty in every possible way.

Consider the tax cuts. Wage-earners saw their take-home pay rise as the IRS reduced withholding. But as with past rebates and one-time tax cuts, consumers proved reluctant to perform their assigned role.

Claudia Sahm, of the Federal Reserve Board. and Joel Slemrod and Matthew Shapiro, of the University of Michigan, found that only 13 percent of households indicated they would spend most of the windfall. The rest said they preferred to put it in the bank or pay off debts — neither of which boosts the sale of goods and services.

This puny yield was even worse than that of the 2008 tax rebate devised by President George W. Bush. Neither attempt, the study reported, " was very effective in stimulating spending in the near term."

The idea behind channeling money to state governments is that it would reduce the paring of government payrolls, thus preserving the spending power of public employees. But the plan went awry, according to a paper by Dartmouth College economists James Feyrer and Bruce Sacerdote published by the National Bureau of Economic Research.

"Transfers to the states to support education and law enforcement appear to have little effect," they concluded. Most likely, they said, states used the money to avoid raising taxes or borrowing money.

That's right: The federal government took out loans that it will have to cover with future tax increases ... so states don't have to. It's like paying your Visa bill with your MasterCard.

The public works component could have been called public nonworks. It sounds easy for Washington to pay contractors to embark on "shovel-ready projects" that needed only money to get started. The administration somehow forgot that even when the need is urgent, the government moves at the speed of a glacier.

John Cogan and John Taylor, affiliated with Stanford University and the Hoover Institution, reported earlier this year that out of that $862 billion, a microscopic $4 billion has been used to finance infrastructure. Even Obama has been chagrined. "There's no such thing as shovel-ready projects," he complained last year.

Even if jobs were somehow created or saved by this ambitious effort, they came at a prohibitive price. Feyrer and Sacerdote say the cost may have been as high as $400,000 per job.

Based on all this evidence, we don't really know whether the federal government can use fiscal policy to engineer a recovery. We do know it can go broke trying.

http://www.chicagotribune.com/news/c...7694073.column

[Riot]

Or, another opinion is that the stimulus worked, but wasn't enough. Considering most Republicans refused to vote for it, surprising anything at all got through.

"Many economists thought the stimulus too small, not too big. The bill funded only a fraction of the infrastructure projects listed by the American Society of Civil Engineers as in need of construction or repair. Worse, the projects did little to stir the imagination of the public. Some of this was inevitable; necessary repairs of sewage systems would never be sexy. But with the exception of $8 billion for high-speed rail, the first such investment ever (placed in the package by Rahm at the eleventh hour) and pehaps some science projects that bore great fruit, it was hard to think of projects that historians would look back on in twenty years and say, "That's what Obama got for his trillion dollars back in 2009. He would have to settle for preventing another Great Depression". - "The Promise" - Jonathan Alter





"Those answers began in the Recovery Act, a grab bag that would never get proper credit for being one of the most important pieces of legislation in a generation. Along with the bank rescue, the ARRA kept a recession from becoming a depression. The extension of unemployment benefits for thirty-three weeks, expansion of food stamps, and $50 billion in stabilization funds to states and localities (which prevented hundreds of thousands of layoffs) all kept the economy from cascading downwards.

Michael Walman, Bill Clinton's former chief speechwriter, believed Obama's big political misfortune on the stimulus was that the budget rules required putting everything in one big package. In fact, it was five landmark pieces of legislation in one. If the bill had been split into the biggest tax cuts for the middle class since Reagan, the biggest infrastructure bill since the Interstate Highway Act in the 1950's, the biggest education bill since Lydon Johnson's first federal aid to education, the biggest scientific and medical research investment in forty years, and the biggest clean energy bill ever, then Obama would have looked like Superman, or at least more like FDR."

[dellinger63]

Mine has well put up a coyote and roadrunner re-run.

You realize we're half way thru 2011 and that was not included. Sure, if you spend $400,000 per job you get jobs but when the bill comes due you get f'd. Again really, it's not rocket science.

On another note if 10 people call a Dr's office for an appointment and there's a 2 week wait what would the wait be for 11-12 calls if those ten decided to pitch in and pay a subsidy for the uninsured? Multiplied everyday? Are Dr's that underworked? IMO NOT!

[Riot]

Originally Posted by dellinger63

Mine has well put up a coyote and roadrunner re-run.

You realize we're half way thru 2011 and that was not included.

Ask and you shall receive. You'll notice the GDP chart above is already inclusive of the first quarter of 2011 (and as the second quarter 2011 ends today, obviously that cannot be included)

So you just need jobs. Here you go. Obama created more jobs in one year than Bush created in eight years.

Finance 101: That's because when there is a recession, you try to stimulate spending. Money churn helps the economy. Thus unemployment benefits, short term jobs like census, etc. help keep the economy from going into a depression. All that is money immediately spent. Thus good for the economy.

You do not cut spending in a recession (like the GOP is threatening to shut down the government trying to do right now) That is bad for the economy. References: See the Bush years. See the Reagan years.

[dellinger63]

Major FUBAR. And these are Obama's economists.

The report was written by the White House’s Council of Economic Advisors, a group of three economists who were all handpicked by Obama, and it chronicles the alleged success of the “stimulus” in adding or saving jobs. The council reports that, using “mainstream estimates of economic multipliers for the effects of fiscal stimulus” (which it describes as a “natural way to estimate the effects of” the legislation), the “stimulus” has added or saved just under 2.4 million jobs — whether private or public — at a cost (to date) of $666 billion. That’s a cost to taxpayers of $278,000 per job.

In other words, the government could simply have cut a $100,000 check to everyone whose employment was allegedly made possible by the “stimulus,” and taxpayers would have come out $427 billion ahead.

All sides agree on these incriminating numbers — and now they also appear to agree on this important point: The economy would now be generating job growth at a faster rate if the Democrats hadn’t passed the “stimulus.”

http://www.weeklystandard.com/blogs/...ob_576014.html