The Stimulus at one year: Is it working?

It’s one year since the American Recovery and Investment Act of 2009 was passed. Is it working?

The Bureau of Labor Statistics says yes:

Obama says it staved off a second Depression:

Nobel-Prize-winning economist Joseph Stiglitz gives it a qualified yes:

Anyone think otherwise?

I’ve watched this thread for over an hour, and no responses yet. I’m eagerly awaiting the analysis of my fellow Dopers on this subject!

Slate Magazine, an admittedly left-leaning publication, has been arguing that it’s a hell of a lot better than nothing, and that things are much better now that they were this time last year. Main points: 1st quarter 2010, the economy was on track to shrink 6%. 4th quarter, it grew about 2%. That’s still not healthy, but it’s a hell of a lot healthier. And the stimulus money is less than half spent; we’re still spending and moving forward with that same $787 billion we passed in the first place.

So it’s too soon to be sure, but it looks good and I remain quite hopeful that it’ll prove successful.

One hopes. But I note the OP, while very long, provides only two points that actually serve as evidence the bill WORKED:

  • According to the nonpartisan Congressional Budget Office, the Recovery Act is already responsible for as many as 2.4 million jobs through the end of 2009

  • As a result, job losses are a fraction of what they were a year ago, before the Recovery Act began

To say the stimulus bill worked you would have to assume not that these things happened (which they did, of course) but that they’re better than would have been the case had no stimulus bill been passed. After all, recessions do have a way of ending. The fact that the U.S. economy is losing jobs slower than it did 12 months ago proves very little. What would have happened without this stimulus bill? And was in, in fact, correctly done - would a different bill have done better?

To guess if the recession is wrapping up faster than would have been the case without the stimulus bill would require a pretty huge pile of economic analysis, which is not what we’re likely to get here.

Your cite is not from the Bureau of Labor Statistics; it is from my.barackobama dot com. If you are claiming to give an objective cite, it might be best not to give a partisan one and misattribute it.

That having been said, your cite makes the following claim -

I’ve seen it argued that tax cuts do not work in stimulating the economy. Barack Obama says they have. Is he wrong?

Regards,
Shodan

[shrug] It’s all good. One way or another, I’m sure we can expect to get a pretty huge pile of something here! :slight_smile:

I think the consensus is that they work but not as much as other uses for the money (like building infrastructure).

Joseph Stiglitz and other economists with similar Keynesian ideologies like Paul Kruger focus on employment and demand. Looking through this lens, they like stimulus spending.

Other economists focus on production and innovation of which employment is a positive natural side effect. If you look at it this way (which I believe is correct), the stimulus bill was a waste of money that provides the temporary illusion of prosperity at the expense of debt (and a lower standard-of-living in the years to come.)

I think they also work better when they’re doled out in smaller increments. That way people have less incentive to save the money and it goes right back into the economy.

I believe the claim is that giving the middle and lower classes a tax cut is a pretty good thing anyway. But as to the old conservative saw about cutting taxes being a great way to spur growth, make people happy, and give everyone fresh breath, here’s what CBO has said:

For ease of reading, here are the policies that would probably increase employment the most in the short term, from most to least effective:

  1. More aid for the unemployed
  2. Cut payroll taxes for businesses that are hiring
  3. Reduce employees’ payroll taxes
  4. Increase Social Security payment
  5. Subsidize investment spending
  6. Invest in infrastructure
  7. More aid to states
  8. Tax credits for the poor and middle class
  9. Reduce impact of AMT
  10. Cut income taxes more

Wow, the Congressional Budget Office says that cutting income taxes isn’t very effective in creating jobs. We liberals are shocked. Shocked, I say.

Nitpick: I think you mean Paul Krugman. Paul Kruger was not an economist.

Correct. I have several of Paul Krugman’s books so don’t know why I wrote of Kruger. Maybe there’s an Olympic athlete named Kruger.

I’ve heard arguments saying, in effect, of course the GDP would go up if the government puts almost $800 billion into the economy. So I looked up how much money the government has actually put into the economy so far through the Recovery Act. Revovery.gov indicates about $57 billion has been sent out. That is way less than I expected. Since some recipients might spend the money before they actually receive it, we can use the high extreme of total funds awarded, or $197 billion. (Anyone have a better cite for total amount spent?)

In real dollars, the GDP increased $91 billion in the 3rd quarter and $221 billion in the 4th quarter.

This graph shows quarter to quarter GDP growth trending down from 1st quarter 2008 to 2nd quarter 2009, and going up coinciding with the stimulus package. Post hoc aside, it appears the economy grew more than the amount spent through the Recovery Act. After a year of negative growth, I’m tentatively convinced that the stimulus package achieved positive results if GDP is an accurate metric. I feel this way because consumer confidence is so vital to the economy. A growing GDP spurs confidence, which I think outweighs future debt concerns (I do not mean all debt concerns; I am only talking about the ramifications of this particular stimulus spending). Consumer confidence was at an all time low (since 1967) in February 09 at 25. It is now at 56. While it is foolish to confidently proclaim success for such a large program this early, it appears to be working.

The problem with this thread and the question it poses is determining exactly how things would have gone without the stimulus. The assumption seems to be that without the stimulus we would have had more job loss and the economy would have been in worse shape, but that’s all guess work since no one knows…it’s all projections and models. But the projections and models that were used to get the stimulus passed weren’t correct either, since they projected a much rosier picture than what we have actually gotten, especially wrt new jobs created and job loss.

To me this is like the guy who takes zinc to get rid of his cold. Since he has taken his zinc faithfully, his cold now only lasts 7 days, but had he not taken it, it could have gone as long as a week!

Maybe some economist 'dopers will come in and show some models or projections on what might have happened without a stimulus or with a differently focused stimulus, but it will still only be a projection. We’ll never know. I’m inclined to think there is at least some level of trying to spin things to look as good as possible given the current circumstances and the fact that we DID do the stimulus when and how we did it. But then, I’m no economist, nor do I play one on the SD, so this is just my laymans take on what is a very complex subject.

-XT

We aren’t talking about conservative claims here; we are talking about Obams’s claim that his stimulus package ended the recession, or saved jobs, or whatever he wants to claim.

As far as I can tell, you and the CBO agree that the portion of the stimulus dedicated to tax cuts - about $300 billion of the total - did not do this, or at least did not do as much as payroll tax cuts and unemployment benefits would do.

IOW, it appears we are in agreement - much of the stimulus was a waste, or nearly so. Unfortunately, now it has to be paid back with interest. Discussion of the stimulus should, to be fair, include discussion of the long-range effects of the huge increase in deficits under the Obama administration.

Regards,
Shodan

Imagine if, one year ago, Congress had passed a stimulus bill that really worked.
Let’s say this bill had started spending money within a matter of weeks and had rapidly helped the economy. Let’s also imagine it was large enough to have had a huge impact on jobs — employing something like two million people who would otherwise be unemployed right now.
If that had happened, what would the economy look like today?
Well, it would look almost exactly as it does now. Because those nice descriptions of the stimulus that I just gave aren’t hypothetical. They are descriptions of the actual bill.
Just look at the outside evaluations of the stimulus. Perhaps the best-known economic research firms are IHS Global Insight, Macroeconomic Advisers and Moody’s Economy.com. They all estimate that the bill has added 1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs. The Congressional Budget Office, an independent agency, considers these estimates to be conservative.

http://www.nytimes.com/2010/02/17/business/economy/17leonhardt.html?partner=rssnyt&emc=rss

“To be fair”, where the fuck were you the last 10 years?

Good point. And if we ever talk about the best way to put out a house that’s on fire with children stuck inside, we should include a lengthy discussion on the dangers of water damage, including how it destroys driwall, encourages rotting, and can even cause black mold that has been linked to diseases.

And let’s be clear: with the exception of Making Work Pay tax credit (which costs $29 billion this year), other tax reform initiatives like the AMT fix (which cost $80 billion this year, and is single handedly responsible for half of the cost of all the tax cuts in 2010) were included to attempt to gain political support from Republicans. Cite. Perhaps we are in agreement – in hindsight, Obama should have ignored the worthless advice of economic conservatives and focused on more job-creating measures.

Please support your claim that the stimulus was a waste. Are you claiming the economy would have grown 2.6% and 6.4% in the 3rd and 4th quarters, respectively, if there were no Recovery Act? Or that it would have grown but at a smaller, yet still encouraging rate? Or are you claiming the long-term debt is too burdensome for the purported short-term benefits?

And to be really fair we should look at the causes of those deficits according to the CBO :