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Most people know that the deficit whiners live largely in a fact free zone, but every now and then it is worth trying to throw a few in their direction in the quest for intelligent life. The immediate motivation is Joe Scarborough’s latest tirade after having Paul Krugman as a guest on his show.
Scarborough is of the view that if stimulus was the answer the economy would have already recovered by now. In this context, we might ask what the stimulus was designed to do relative to the size of the problem.
The best evidence here is the assessment of the Congressional Budget Office (CBO) from March of 2009. The reason this analysis is useful is that it is a look at what the economy was expected to do and the impact of stimulus at the time it was passed. CBO was looking at the actual stimulus as passed. It also in an independent agency with no motive to cook the books.
Here’s the picture that CBO drew compared to what actually happened.
Source: Congressional Budget Office.
There are two points which should jump out at anyone. First, even as late as March of 2009 CBO hugely underestimated the severity of the downturn. The actual drop in employment from 2008 to 2009 was 5.5 million. The predicted drop was just 3.8 million. In other words, CBO underestimated the initial hit from the downturn by 1.7 million jobs, even after it was already well underway.
If anyone wants to blame the greater severity of the downturn on the stimulus they would have a hard story to tell. Most of the hit was before a dollar of the stimulus was spent. Employment in March of 2009 was 5.4 million before its year ago level.
Of course CBO was overly optimistic about the pace of the turnaround. It predicted that employment would rise by 1.7 million in 2010 even if we did nothing. Someone may have a story about how this increase would have happened had it not been for the stimulus (lower interest rates?), but it is difficult to envision what that story would look like.
The other point that this chart makes nicely is that the predicted gains from the stimulus were small relative to the size of the downturn. CBO predicted that the maximum benefit from the stimulus would be in 2010 when employment would be 2.4 million higher than without the stimulus. This needs to be repeated a few hundred thousand times the stimulus was only projected to create 2.4 million jobs.
That is not rewriting history or making it up as we go along. This is a projection from an independent agency made at the time the stimulus was passed. The economy ended up losing over 7 million jobs. At its peak impact, the stimulus was only projected to replace 2.4 million of these jobs. And after 2010 the stimulus’ impact quickly went to zero as the spending and tax cuts came to an end.
How can anyone be surprised that the stimulus did not bring the economy back to full employment? No one expected it to be large enough to reverse the impact of a slump of this magnitude.
President Obama and his team deserve lots of criticism for failing to recognize the severity of the downturn. They deserve even more blame for not acknowledging this fact, and that their stimulus was inadequate for the task at hand.
But their errors do not change the reality. The stimulus was not designed to create 7 million jobs. Why would Joe Scarborough or anyone else be surprised to see that it didn’t?
Dean Baker is co-director of the Center for Economy and Policy Research. He also writes a regular blog, Beat the Press, where this post originally appeared.
14 Comments
Amazing how the mighty Wurlitzer just keeps churning out falsehoods. At the extreme end there are the Creation Scientists, a little further toward the middle the Global Warming deniers. Scarborough can get away with this stuff (just as Niall Ferguson does on a higher plane) because despite all the courses in Econ l01 given to undergraduates, the overwhelming majority never learned anything. I attribute this to reliance on textbooks (which I rarely used), and multiple-choice tests.
Whatever the reason, it is nevertheless remarkable that flat-earth economics should hold such sway in public discourse.
The only way it can is because the corporate media props it up.
I’m of the jaded opinion the Obama Adm. was told ( and knew ) the economic stimulus was inadequate. Certainly, several economic advisers told a Democratic super-majority Congress that it should of been double the actual amount. And, that other steps/actions were needed, as well. But, the Iraq/Afghanistan war $$ trumped these considerations. And, so did the looming 2010 elections. Which the knuckleheads lost, anyway, because they failed their constituents on Healthcare for All, as well. Obama’s 1st term presidency will be looked back upon as ” one, big, missed, opportunity “. For the middle class, that is. His second term, I’m afraid, will be framed by Sen. Harkin’s comment, ” as a 4 yr. vacation “. Maybe that’s all he wants, too. As for Joe Scarborough and his bunch: they’ve pretty much proven they couldn’t pour piss from a boot if the instructions were on the heel. I’m sure, at this point, they couldn’t even get it to trickle down and out without making a bigger mess, so to speak.
The Obama stimulus was $768 billion or something like that? 35% tax cuts to corporate America leaving less than $500 billion. Germany with 100 million souls passed their own stimulus of over $500 billion, meaning the Obama stimulus was 1/3 the size of the German stimulus.
Yeah, but Germany is equal parts Commie/Socialist/Statist/ and is located somewhere near France. Whereas, America is a free market wunderkind and a beacon unto an unenlightened world. Just sayin’.
It was a banker’s stimulus, not a people’s stimulus. I have not yet forgotten the names of President Obama’s financial advisers and where they came from.
Morning Joe Blowhard, Mika Stockholm Syndrome, and their circle-jerking band of beltway grifters can take their specious horseshit and stuff it.
Do these people have any idea just exactly how utterly and completely clueless they are? (Yeah, I know. Rhetorical question.)
Just because your hosting a show on tv does not mean you know what you are talking about. Mika’s comparison of the deficit crisis with climate change was priceless. A little bit of knowledge, a loud mouth, and your own tv show can be a dangerous thing.
These people are a joke. I don’t know why anyone bothers going on this show. Half of the time they are not even there. Joe S could not make it working in disciplined private corporation setting punching a clock like we do but he has all kinds of advice for the rest of us. MSNBC has to hire and tap into a number of co-hosts to cover for him when he is absent. His buddy Rep King was a guest one morning and asked him where he was half of the time. He said “your never here Joe” ! Typical Republican.
Was that all stimulus, or are you counting TARP II?
Let’s not forget that a sizable portion of the stimulus was business tax cuts that did zero to create jobs. The reason is that businesses don’t hire when their tax rates go down. They hire when their sales go up, and there was a collapse of demand.
“they’ve pretty much proven they couldn’t pour piss from a boot if the instructions were on the heel.”
Thank you for that. Of course I will be putting it to good use.
I think he means that was all stimulus. TARP II was far larger, was it not? I could be wrong.
Joe Scarborough’s just another millionaire talking head. The sad thing is he’s actually one of the smarter so-called conservative ones. Of course, when your standard is set by the likes of Glenn Beck and Rush Limbaugh, it’s real easy to be the big fish in the little puddle of right wing intelligence.