# Was The "Stimulus" Worth It? **URL:** \ **Category:** Great Debates\ **Created:** [July 4, 2011, 6:21pm UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831 "2011-07-04T18:21:56Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [July 4, 2011, 6:21pm UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/1 "2011-07-04T18:21:56Z")
Drudge reports that each stimuls job “created” cost $278,000. So, was increasing the National Debt by trilions worth this? My impression is that the stimulus was used to fund local and state government-it did not fund any new public works projects. Would it have been cheaper to just pay extended unemployment insurace? Or , has the stimulis created an expectation that government cannot be allowed to shrink? (Geithner “we cannot ct our way to prosperity”). At any rate, what will Obama try next year? More deficit spending? ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [July 4, 2011, 7:20pm UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/2 "2011-07-04T19:20:22Z")
> [@ralph124c](#): > > Drudge reports that each stimuls job “created” cost $278,000. > So, was increasing the National Debt by trilions worth this? > My impression is that the stimulus was used to fund local and state government-it did not fund any new public works projects. > Would it have been cheaper to just pay extended unemployment insurace? > Or , has the stimulis created an expectation that government cannot be allowed to shrink? (Geithner “we cannot ct our way to prosperity”). > At any rate, what will Obama try next year? More deficit spending? It didn’t raise that national debt by trillions. It did create tons of new public works projects – just look at [recovery.gov](http://recovery.gov). We did pay for unemployment extensions. Of the $499 million of the ARRA that was actually spending (not tax cuts), CBO estimates that between 1.2 million and 3.3 million jobs were created. The number of jobs that were created AND sustained (e.g., that ARRA funded a teacher’s job who would have otherwise been laid off) is between 1.6 million and 4.5 million. Considering that about a quarter of the stimulus is for public works projects, where we actually have to buy steel and concrete and stuff, that’s an average of $170,000 per job saved or created, EVEN WITH the funds used for non-payroll purposes. Every way you slice it, ARRA has been a success. It should have been a bigger success, but that doesn’t make it a failure. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [July 4, 2011, 7:24pm UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/3 "2011-07-04T19:24:29Z")
> **[CHART: When Will Tax Cuts Become The Public Debt's Biggest Problem?](https://www.huffpost.com/entry/bush-tax-cuts-debt_n_864812)** > > CHART: When Will Tax Cuts Become The Public Debt's Biggest Problem? I feel sad that people don’t understand what happened to create the deficit. It has been out for a while. [http://www.truthdig.com/report/item/four\_trillion\_for\_war\_--\_and\_rising\_20110701?ln](http://www.truthdig.com/report/item/four_trillion_for_war_--_and_rising_20110701?ln) And the huge waste of money, approaching 4 trillion in wars. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [July 4, 2011, 7:40pm UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/4 "2011-07-04T19:40:49Z")
> [@gonzomax](#): > > [Bush-Era Tax Cuts Projected As Largest Contributor To Public Debt [CHART] | HuffPost Impact](http://www.huffingtonpost.com/2011/05/20/bush-tax-cuts-debt_n_864812.html) > > I feel sad that people don’t understand what happened to create the deficit. It has been out for a while. > [http://www.truthdig.com/report/item/four\_trillion\_for\_war\_--\_and\_rising\_20110701?ln](http://www.truthdig.com/report/item/four_trillion_for_war_--_and_rising_20110701?ln) > And the huge waste of money, approaching 4 trillion in wars. Are you responding to my post? Because this seems like a non-sequitir. The stimulus added to the deficit, yes, but your own citation says the stimulus is less than 10% of the problem. If you are responding to my post, you might want to make reference to the things I said. Because the Bush tax cuts and the cost of the wars was not addressed in my post – and they don’t really have anything to do with the value of the stimulus, either. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [July 4, 2011, 9:11pm UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/5 "2011-07-04T21:11:54Z")
> [@ralph124c](#): > > Drudge reports . . . Now there’s your **first** mistake. ---
**Author:** ![Punoqllads](https://avatars.discourse-cdn.com/v4/letter/p/d2c977/32.png) [@Punoqllads](https://boards.straightdope.com/u/Punoqllads)\ **Post date:** [July 4, 2011, 9:28pm UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/6 "2011-07-04T21:28:14Z")
Ah, yes, just finished debunking this for a relative. For those playing along at home, [here](http://www.whitehouse.gov/sites/default/files/cea_7th_arra_report.pdf) (warning, pdf) is the report. If you look at table 4 and average out the job numbers, you get an average of 2.45 million jobs over 2 years, which works out to be $136,000 per job per year. And if you look at the Excel spreadsheet [here](http://www.bea.gov/national/xls/gdplev.xls) and match up the percent lift in table 4 with the quarterly GDP in the Excel spreadsheet you’ll see that the $700B spent resulted in an estimated $2.9T increase in GDP, over 4 times what the government spent. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [July 4, 2011, 9:33pm UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/7 "2011-07-04T21:33:21Z")
> [@Ravenman](#): > > Are you responding to my post? Because this seems like a non-sequitir. The stimulus added to the deficit, yes, but your own citation says the stimulus is less than 10% of the problem. > > If you are responding to my post, you might want to make reference to the things I said. Because the Bush tax cuts and the cost of the wars was not addressed in my post – and they don’t really have anything to do with the value of the stimulus, either. Ralph was talking about the deficit and clearly made the point the stimulus was a big cause of the deficits. Then talked about Obama and " more deficits". It was not about you. But since he was suggesting the stimulus was a big factor, it had to be pointed out what really caused it and how small a factor it was. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [July 4, 2011, 10:27pm UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/8 "2011-07-04T22:27:35Z")
> [@ralph124c](#): > > Drudge reports that each stimuls job “created” cost $278,000. But the stimulus created far more than just jobs. We get new roads, bridges and badly needed infrastructure, so pretending all that money went for jobs alone is disingenuous. ---
**Author:** ![Qin\_Shi\_Huangdi](https://avatars.discourse-cdn.com/v4/letter/q/f04885/32.png) [@Qin\_Shi\_Huangdi](https://boards.straightdope.com/u/Qin_Shi_Huangdi)\ **Post date:** [July 4, 2011, 10:48pm UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/9 "2011-07-04T22:48:46Z")
> [@BrainGlutton](#): > > Now there’s your **first** mistake. And its acceptable to cite Huffington? :dubious: ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [July 4, 2011, 11:25pm UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/10 "2011-07-04T23:25:17Z")
> [@Qin\_Shi\_Huangdi](#): > > And its acceptable to cite Huffington? :dubious: Brietbart is one of their editors now. You should be quite comfortable with Huffington since it was sold. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [July 5, 2011, 12:04am UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/11 "2011-07-05T00:04:33Z")
The dumb figures about how much each job cost, totally ignores jobs saved. It is dishonest use of statistics. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [July 5, 2011, 12:08am UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/12 "2011-07-05T00:08:33Z")
> [@Punoqllads](#): > > Ah, yes, just finished debunking this for a relative. For those playing along at home, [here](http://www.whitehouse.gov/sites/default/files/cea_7th_arra_report.pdf) (warning, pdf) is the report. If you look at table 4 and average out the job numbers, you get an average of 2.45 million jobs over 2 years, which works out to be $136,000 per job per year. And if you look at the Excel spreadsheet [here](http://www.bea.gov/national/xls/gdplev.xls) and match up the percent lift in table 4 with the quarterly GDP in the Excel spreadsheet you’ll see that the $700B spent resulted in an estimated $2.9T increase in GDP, over 4 times what the government spent. I don’t know how you come up with any jobs created if the unemployment rate at still close to 10%. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 5, 2011, 12:09am UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/13 "2011-07-05T00:09:47Z")
> [@Punoqllads](#): > > Ah, yes, just finished debunking this for a relative. For those playing along at home, [here](http://www.whitehouse.gov/sites/default/files/cea_7th_arra_report.pdf) (warning, pdf) is the report. If you look at table 4 and average out the job numbers, you get an average of 2.45 million jobs over 2 years, which works out to be $136,000 per job per year. And if you read that report a little more closely, you discover that it is just a re-run of the same models used to predict the job creation of the stimulus in the first place, only updated to reflect changes in the actual bill and the speed and direction the money was released. It is NOT based on actual data. What it’s good for is measuring how the _prediction_ changed based on the government’s effectiveness in getting the money out. It still uses models based on Keynesian assumptions, and those models are still in question. Increasingly so, in fact. We just had a discussion about this in the elections forum. There have been a lot of economists looking at the actual data from the stimulus, and coming to different conclusions. For example, Here’s a Professor of Economics from Harvard, writing in the [New York Times](http://economix.blogs.nytimes.com/2010/06/01/what-we-dont-know-and-perhaps-cant/): > [@](#): > > The chart below shows a plot of the change in unemployment between January 2009 and March 2010 on per capita Federal Recovery Act funds received in each state.This relationship is negative and almost statistically significant at the 5 percent level, which lends a bit of support to the view that the recovery spending reduced unemployment. But that negative relationship is driven entirely by three states with very few people — Alaska and the Dakotas. If I weight by population, or eliminate those three states, or even control for state unemployment as of January 2009, there is no longer any significant relationship between spending and change in unemployment. I’m not suggesting that spending did or didn’t reduce unemployment; I am asserting that we can’t tell anything with any degree of certainty. The chart in question is a chart of stimulus funds provided to states for infrastructure development, plotted against the change in the unemployment rate over that period. There is statistically _no effect_. Whether the stimulus helped or hurt, the effect in the case of infrastructure funds was so small it is swamped by normal variation. Certainly you don’t see the kinds of big effects that were predicted. Here is a [new paper](http://www.stanford.edu/~johntayl/JEL_taylor%20revised.pdf) by economist John Taylor at Stanford, which looks at a whole bunch of data from the 2001, 2008, and 2009 stimulus packages. Figure 2 is most interesting - it’s a graph which overlays personal income increases due to stimulus (tax cuts and direct payments to individuals), with actual measured consumption during the same period. On the income line you can see spikes where stimulus money was rolled out, but the consumption line shows no corresponding change. People simply didn’t spend the money they got as part of the stimulus. His conclusion in that section: > [@](#): > > The results imply that the Keynesian multiplier for transfer payments or temporary tax rebates was not significantly different from zero for the kind of stimulus programs enacted in the 2000s. Again, this is only part of the stimulus - the temporary tax breaks. Lots of economists predicted they would do little, because of a principle called the permanent income hypothesis: people tend to spend based on their estimation of the long-term income. If they are heavily in debt and they get a short-term tax break, they just sit on the money. So, so far the tax cut part looks to be a failure. Infrastructure spending was also a failure - it was quite small (61 billion), it took too long to get out (some of the infrastructure projects still haven’t even started), and it was targeted more at states with political clout than at ones that needed it the most, which would cause more crowding-out effects of labor. The conclusion of that paper: > [@](#): > > In sum, this empirical examination of the direct effects of the three countercyclical stimulus packages of the 2000s indicates that they did not have a positive effect on consumption and government purchases, and thus did not counter the decline in investment during the recessions as the basic Keynesian textbook model would suggest. Individuals and families largely saved the transfers and tax rebates. The federal government increased purchases, but by > only an immaterial amount. State and local governments used the stimulus grants to reduce their net borrowing (largely by acquiring more financial assets) rather than to increase expenditures, and they shifted expenditures away from purchases toward transfers. He also addresses the argument that the economy was ‘worse off than thought’ as an excuse for why the stimulus didn’t produce the kinds of unemployment numbers predicted, and he addresses Krugman’s argument that the stimulus didn’t work because it was too small. In short, here’s the picture of why the stimulus failed: - The part that consisted of tax cuts was temporary, and didn’t change spending behavior. - The part that was direct infrastructure was too small, took too long, and wasn’t targeted well. - The part that was direct transfers to states was not used to create additional spending, but simply replaced the states’ own spending. They basically pocketed the money. In addition, even the CBO’s projection with its grossly optimistic fiscal multipliers and estimates found that after 10 years the U.S’s GDP would be .4% LOWER with the stimulus than without it. This is because while the stimulus was supposed to produce enough demand to help smooth the recession, once the money was spent the addition to the debt would be a net drag on the economy. And it will be so forevermore, since no one expects the debt to be paid off in our lifetimes. Think about what the stimulus cost you: If the government funds rate goes back to the average for the last 20 years of 3.5%, then the U.S. will now pay 29.5 billion dollars _every year_ ad infinitem, in interest on the stimulus. That’s just about two NASAs. As a comparison, NASA’s program for a manned Moon/Mars program was canceled because to make it happen they would have needed an additional 3 billion dollars per year. The interest on the stimulus alone is ten times that much. What a waste. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [July 5, 2011, 12:16am UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/14 "2011-07-05T00:16:49Z")
> [@ralph124c](#): > > My impression is that the stimulus was used to fund local and state government-it did not fund any new public works projects. Even if this were true, it’s not a bad thing; state and local governments across the country are in serious financial trouble (remember the Colbert bit about Arizona selling off public buildings and renting them from the new owners to raise quick cash?) and would be in far worse trouble if not for federal funds. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 5, 2011, 12:26am UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/15 "2011-07-05T00:26:11Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Even if this were true, it’s not a bad thing; state and local governments across the country are in serious financial trouble (remember the Colbert bit about Arizona selling off public buildings and renting them from the new owners to raise quick cash?) and would be in far worse trouble if not for federal funds. Yes, but it wasn’t _stimulative_. It was just a transfer of debt from the states to the federal government. This took pressure off the states to actually do something about their deficits, prolonging the problem. In some states it made the problem worse - the states used the money to raise the pay of state employees, making their long-term fiscal imbalance even worse. And new infrastructure that was built is infrastructure that has to also be maintained. Anyway, in the other thread we also discussed [this paper](http://economics.uwo.ca/images/news/TheAmericanRecovery.pdf), which argues that the stimulus either created very few jobs or even cost a lot of jobs, but had the major effect of destroying private sector jobs in favor of saving public sector jobs. In other words, it permanently transferred a chunk of the workforce from the private sector to the government. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 5, 2011, 12:48am UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/16 "2011-07-05T00:48:05Z")
Here’s another [(gated) paper](http://ideas.repec.org/p/nbr/nberwo/16479.html) from the National Bureau of Economic Research on fiscal multipliers. Remember, fiscal multipliers are necessary for Keynesian stimulus to work, and the CBO assumed multipliers as high as 2.5 for its models. From the abstract of the linked paper: > [@](#): > > Based on a novel quarterly dataset of government expenditure in 44 countries, we find that (i) the output effect of an increase in government consumption is larger in industrial than in developing countries, (ii) the fiscal multiplier is relatively large in economies operating under predetermined exchange rate but zero in economies operating under flexible exchange rates; (iii) fiscal multipliers in open economies are lower than in closed economies and (iv) fiscal multipliers in high-debt countries are also zero. As a reminder, the U.S. has a floating exchange rate, an open economy, and high debt. All characteristics of a country that should expect a fiscal multiplier of near zero. I could go on - Christina Romer and David Romer’s paper from last year on the effects of exogenous tax changes found that tax increases that paid down the deficit had no negative GDP effects, but those that were used for spending cost 3% in GDP growth for every 1% in tax increase. That would suggest that deficits are seen by the economy as about as damaging as tax increases - which means borrowing money for a tax cut or for fiscal spending should be at best a wash. That’s not their conclusion, as they weren’t looking at fiscal stimulus at all, but it’s an interesting result of their paper that bears further examination. In addition, there’s the classical argument that government injections of cash, directed fiscal spending, temporary tax cuts, temporary rebates, and other ways in which the govenrment attempts to steer the economy have the effect of destroying price information, making it harder for businesses to plan, prevent the clearing out of misallocated resources, and create timing hazards. For example, it’s pretty clear now that ‘cash for clunkers’ had as its primary effect the shifting of demand for new cars from before and after the ‘clunker’ period into that period - turning a smooth demand curve into two troughs and a spike. This caused temporary shortages of some cars, added confusion to the supply chain, and because it required that perfectly good used cars be destroyed in the process, has driven up the price of used cars for poor people. Oh, and it added another 10 billion dollars to the debt. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [July 5, 2011, 1:19am UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/17 "2011-07-05T01:19:52Z")
> **[CBO Report Shows Stimulus Plan Had Positive Effects On Economy](https://www.citytowninfo.com/career-and-education-news/articles/cbo-report-shows-stimulus-plan-had-positive-effects-on-economy-10083001)** > > CBO Report Shows Stimulus Plan Had Positive Effects On Economy - CityTownInfo's career and education news covering topics related to college trends, college admissions, unemployment, job hunting and more. The CBO says the stimulus created jobs and had a positive effect on the economy. The cost was 7.8 billion. It saved and created jobs that paid into the economy. The waste was the tax cuts that were included. We know they do not work. ---
**Author:** ![Susanann](https://avatars.discourse-cdn.com/v4/letter/s/7ab992/32.png) [@Susanann](https://boards.straightdope.com/u/Susanann)\ **Post date:** [July 5, 2011, 2:46am UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/18 "2011-07-05T02:46:06Z")
> [@ralph124c](#): > > Drudge reports that each stimuls job “created” cost $278,000. > So, was increasing the National Debt by trilions worth this? > My impression is that the stimulus was used to fund local and state government-it did not fund any new public works projects. > Would it have been cheaper to just pay extended unemployment insurace? > Or , has the stimulis created an expectation that government cannot be allowed to shrink? (Geithner “we cannot ct our way to prosperity”). > At any rate, what will Obama try next year? More deficit spending? Frankly, I would just rather they give me a check for $275,000.00 ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [July 5, 2011, 3:14am UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/19 "2011-07-05T03:14:58Z")
But won’t someone think of the jobs that were saved? Without the stimulus, unemployment would be at 87% and world financial markets would have collapsed! That was my whole problem with the stimulus. Every time Obama mentioned jobs, he always couched it with the “created or saved” argument. It was a win-win. No matter what happened, it Would Have Been Worse. How he has this alternate timeline prediction-enator, I’m not sure. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [July 5, 2011, 3:19am UTC](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831/20 "2011-07-05T03:19:43Z")
> [@Susanann](#): > > Frankly, I would just rather they give me a check for $275,000.00 Your taxes have almost certainly been cut at least twice during this fiscal crisis. Isn’t that enough for you? [Next page](https://boards.straightdope.com/t/was-the-stimulus-worth-it/587831.md?page=2)