Stimulus Report Card

One of the frustrating aspects of our current economic position is that the debate surrounding appropriate policies is so fraught with ideological land mines. One of the bigger issues constantly being thrown up for discussion is the success or failure of the administration’s stimulus package. Right wingers, who oppose government intervention in the economy under any circumstances, use our rising unemployment rate as proof positive that the stimulus failed. They inveigh against further action, and even go as far as to call for a roll back of spending under the suddenly fashionable rubric of fiscal conservatism.

Those of us aghast at the damage such a roll back would do can take comfort from the Congressional Budget Office analysis released yesterday. This is the second time the CBO has ‘scored’ the effectiveness of the stimulus and each time the conclusion has been very positive.

The stimulus worked.

According to the CBO we saved a minimum of 640,000 jobs and increased GDP by anywhere between 1.2% and 3.2% during the Third Quarter.

There are very wide ranges within these estimates which result from the fact that the CBO did not score the effects of indirect spending – things like tax cuts and subsidies – which formed a large portion of the package. Instead they confined themselves to an analysis of the impact of direct spending – construction activity etc. So the lower boundary, the 640,000 jobs saved, is much more secure than the upper boundary which necessarily includes a fair bit of ‘guesswork’.

Nonetheless the stimulus worked the way it was intended. Its opponents now need to quieten down and offer more constructive policy alternatives. So far such alternatives have been remarkably absent. The whole objective of the right wing has been to thrash away at the Obama agenda rather than to suggest something else. This is hardly useful. In fact it is downright harmful. The reason being that by whipping up an ideologically based storm against the stimulus the right wingers have effectively removed a renewal or augmentation of it as a policy option. This is despite its success, and despite it being the only positive action we can take to prevent a calamity.

One way around this political impasse is to re-brand the stimulus in the public’s eye as a ‘jobs program’. This is what seems to be going on in Congress. There are plenty of ideas floating about that all center on pumping more money into the economy to attack unemployment. Until we see more details it is difficult to assess these programs in terms of their effectiveness and cost, but it looks increasingly likely we will get something fairly soon. Thus far the initiative is coming from the House with the Administration acquiescing rather than leading. Who knows what the mood in the Senate will be, replete as it is with ‘centrist’ Hooverites.

Still, it’s good to see the CBO put to rest the stimulus ineffectiveness argument. Not that their report will stop the silliness.

Which is unfortunate given that people’s livelihoods are at stake.