Frankly I'm not sure what is remarkable about it. It's a bell-curve graph, which is pretty much what you would expect to see in an economic recovery. The recession began, worsened, started to bottom out from around November-March, and then began a recovery.I wanted to build some graphs of my own using Bureau of Labor Statistics data looking back at the last two recessions of the early 2000s and the early 1990s but had trouble navigating the website. However, I did find the following chart:
What we see is that the former recession began shortly after Bush took office, peaked in late 2001 and then began a recovery -- another bell-shaped curve -- which took place absent a massive spike in government spending. (My guess is the recovery would have been more robust but the Iraq War -- note the unemployment spike in early 2003 -- drove up oil prices and uncertainty, causing a slowdown)Let's also remember that the economic recovery of the early to mid-1990s took place in the wake of a stimulus package that was only an infinitesimal fraction of the one passed last year.
While counter-factuals are always difficult, we should also keep in mind that France and Germany -- which spent less on their own stimulus packages -- achieved more impressive returns to growth.
Then of course there's this pesky graph:
To summarize, the fact that signs of economic health have improved under the Obama Administration's watch isn't really cause for celebration or praise, as recovery inevitably follows recession. Rather, what is incumbent upon the administration to prove is that the recovery is more robust than would have otherwise been the case absent their policies. Given our experience with recovery from past recessions, the recovery taking place in other countries which engaged in less public sector spending, and the administration's own predictions, that's a rather difficult argument to make.Updated: Related thoughts from Megan McArdle.
4 comments:
But what does the pesky chart show other than job losses were worse than expected? The CBO figures that 2 million people that would otherwise not be working have jobs because of the stimulus package. If anything, that "pesky chart" seems to indicate that the Stimulus Package ought to have been bigger--and it probably should not have been so tax-cut heavy. Those are the options that many on the Left pushed and sacrificed in a vain attempt at bipartisanship.
The chart shows that the stimulus package did not live up to the promises made by the Obama Administration. It's a failure by the standard they themselves set. If you counter with "Yeah, but it would have been worse" then you're essentially engaging in "heads I win, tails you lose" debating, as it would be impossible to prove the stimulus a misguided initiative.
Given the problems with macro-level modeling -- as evidenced by that graph -- the accuracy of the CBO's assessment is not at all clear. Further, according to PolitiFact the actual CBO estimate was 800,000-2.4 million, which is both wise CYA on their part and an implicit acknowledgment of the problems with modeling.
But let's assume the 2 million figure is correct. Take the cost of the stimulus package, now at $862 billion (it was recently revised upwards) and divide it by 2 million. The number you get is $431,000 per job saved or created. In other words, you could give 2 million people checks for $200,000 -- enough to live on for four years minimum I would think -- and we'd still have spent less than half as much! This is success?
As for your contention about tax cuts (and what tax cuts? I still have yet to find one single tax rate which was cut) being inferior to spending, I don't see how such a statement can be supported. Government expenditures have to be planned and executed. There isn't a giant spigot that can be quickly turned on. This is especially true for infrastructure spending. Indeed, look at today's Washington Post:
http://www.washingtonpost.com/wp-dyn/content/article/2010/02/17/AR2010021701958_pf.html
"We're just now starting to see the infrastructure kick in and lead to job creation," said David Wyss, chief economist at Standard & Poor's. " 'Shovel-ready' doesn't always mean shovel-ready."
This year, spending will shift to investments in infrastructure, energy-efficiency upgrades, broadband and other areas. It is this spending that has been slow to ramp up. Of the $226 billion that was put toward these investments, only $31 billion has been spent.
It logically follows that if more money had been devoted to spending that even less would be currently circulating in the economy. In fact, if injecting more money into the economy quickly is the goal, few measures beat tax cuts. But then again tax cuts means placing money directly in the hands of citizens, rather than giving it to politicians to dole out, so I understand why so many Democrats are opposed to the notion.
On Feb. 11, 2009, Congress gave final approval to a $787 billion stimulus package requested by President Obama that was meant to bolster an economy that had been contracting rapidly in the wake of the credit crisis of the previous fall.
. . . .
But by November, with a quarter of the funds out the door, a consensus had developed among analysts across a wide range of views that the stimulus package, as messy as it is, was working.
The legislation, a variety of economists say, is helping an economy in free fall a year ago to grow again and shed fewer jobs than it otherwise would. Mr. Obama's promise to "save or create" about 3.5 million jobs by the end of 2010 is roughly on track, though far more jobs are being saved than created, especially among states and cities using their money to avoid cutting teachers, police officers and other workers.
. . . .
The final bill includes $507 billion in spending programs and $282 billion in tax relief, including a scaled-back version of Mr. Obama's middle-class tax cut proposal, which would give credits of up to $400 for individuals and $800 for families within certain income limits.
Those tax cuts. Further reading:
http://topics.nytimes.com/top/reference/timestopics/subjects/u/united_states_economy/economic_stimulus/index.html
http://www.usatoday.com/news/washington/2009-02-21-obama-saturday_N.htm
or simply:
http://www.google.com/search?hl=en&client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&hs=cuw&q=2009+stimulus+tax+cuts&aq=1&aqi=g7&oq=2009+stimulus+tax+
Right, but what taxes were actually cut? Which tax rates were reduced?
Also, I have to point out an error on my part. I should have divided that $431,000 figure by a third, given that only a third of the stimulus has been spent thus far. So actually the amount spent per job "saved or created" comes out to roughly $144,000. Not sure that changes the overall point, but it's certainly less egregious waste.
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