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  • Claims That Stimulus Is Working Are "Groundless"

    On August 6, Christina Romer, the chairman of the President’s Council of Economic Advisers, gave a talk entitled “So, Is It Working? An Assessment of the American Recovery and Reinvestment Act at the Five-Month Mark.” United States Court of Appeals for the Seventh Circuit judge Richard Posner has posted a response a The Atlantic, reading in part:

    Let me make clear at the outset that I support the stimulus, though I wish it had been better designed. … Romer argues in her talk that by the end of the second quarter of this year, $100 billion of stimulus money had been spent. That is a suspiciously round number, and it is unclear how it was arrived at; but let us assume it is accurate. She then argues that this small expenditure–about two-thirds of one percent of the Gross Domestic Product–is responsible for the fact that the decline in GDP fell (on an annualized basis) from 6.2 percent in the first quarter of the year to 1 percent in the second quarter (though the latter figure is likely to be readjusted upwards).

    This assertion is groundless. No one has the faintest idea what effect the stimulus has had. My guess is that it has had some positive effect, because of its confidence-enhancing character that I mentioned earlier and because some of the $100 billion–though no one seems to know how much–has been spent rather than saved. But it is impossible to determine the net impact of the stimulus on GDP or employment because so much else has been happening to stimulate an economic recovery. Some people have had to dissave–turn savings into expenditures–because their income has fallen (maybe because they have become unemployed) below the level necessary to cover their basic expenses. Some people have had to replace durables that wore out. Foreign demand for U.S. products has risen some. (Dissaving, replacing durables, and export growth if the domestic currency loses value are standard nongovernmental spurs to recovery from a depression.) And the government has been doing a lot to stimulate recovery besides the stimulus–has in fact expended or guaranteed trillions of dollars in an effort to increase the amount of lending, which is essential to economic activity.

    Disentangling the various factors that are responsible for the reduction in the rate of decline of output in the second quarter is probably impossible, but in any event has not, to my knowledge, been attempted–and certainly not in Romer’s talk.

    Posted in Ongoing Priorities [slideshow_deploy]

    9 Responses to Claims That Stimulus Is Working Are "Groundless"

    1. matthew queens, ny says:

      The only true stimulous that would have worked would have been an across the board tax cut; also locking in the Bush era capital gains and dividend tax cut. As for any big government spending it was too light on infrastructure such as highways and rails. I do believe we should be looking into a high speed rail in the overcrowded eastern corridor.

    2. Pingback: » Financial News Update - 08/19/09 NoisyRoom.net: Where liberty dwells, there is my country…

    3. Andres Torres- Houst says:

      This administration are clue less about economics and they are suppose to be from the best schools in America. The easiest way to get the economic going is to put money in the consumers packet by cutting taxes so they buy more goods. The reality is that they don't care what happen to the economic as longer they continue to have programs for the lazy and uneducated people of this country. They are pins and by keeping their prostitutes happy they will always received their votes.

    4. Lloyd Scallan - New says:

      Why is this a story or surprise to anyone? Obama and his lackeys are all liers. We all know this, or at lease should know this. Obama and Bidden lied lied throughout the campaign. Why would anyone think that would change once they took over Washington?

    5. Richard Norton, rura says:

      Yep this bill was a repayment of campaign donations, nothing more, the pork was so big it has topped anything to date. I guess this administration can claim everyone that is still employed had there jobs saved by this stimulis bill. The old saying applies her for all these well educated people in this admistration from the best schools. "You can lead a horse to water, but you can't make him drink, you can send a fool to college, but you can't make him think!

    6. Earl, Queens, NY says:

      Let me revise the ‘Those were the days’ theme song from All in the Family: “….Mister we can use a man like Ronald Reagan again….didn’t need no porklulus bill….” Reagan inherited Carter’s economic mess – far worse than what BHO inherited. But instead of whining about his predecessor, Reagan worked on real solutions; including across the board tax relief. 3 years later, inflation, interest rates and unemployment had fallen sharply. We had prosperity. Reagan NEVER would’ve supported that phony $787 billion stimulus/porkulus bill, bailouts, national health care, cap and trade, runaway wasteful deficit spending, government takeovers of industry, etc. These policies of the democraps currently in power will do nothing but flush this country down the economic drain. As we approach the 2010 and 2012 election seasons, we need to recruit many Reagan-like candidates for both Congress and the White House!!

    7. fiftyfifty says:

      dont forget card check

    8. Lynn B. DeSpain says:

      The Federal Stimulus Program is akin to feeding Viagra to earthworms. Makes for some excitement, but doesn't really accomplish anything.

      Hozro

    9. Roger S., Ma. says:

      All "magical thinking" capitals of the world are bested by the one and only in D.C.

      – Just looked at a list of undergraduate requirements existing today at American colleges and universities. In the Northeast sector of the U.S. there are exactly ! 2 ! requiring a basic course in Economics. One of these is the US Military Academy at West Point. Requirements in Government and History fare little better. Math requirements also don't rank very high and may often be taken "light".

      – In the 18th century, when our Constitution was discussed and written, Adam Smith's "Wealth of Nations" was a common topic of discourse among educated people, as were the writings of John Locke. No need to mention Aristotle or Plato. Math wasn't as advanced as today, but also part of the "kit".

      – When today's students are told, on Commencement day, that now they have achieved "admission to the society of educated men and women", they are being lied to. Unless they were very curious and industrious on the side, all they will have achieved is basic pre-professional training. In too many cases they will have fulfilled numerous degree requirements in one, or a few, specific areas leaving the majority of fields of knowledge un-tilled, let alone seeded. We will be bearing the costs of the complacent university administrators, and faculty and alumni committees, who allowed this to happen for at least the next generation, and then only if we start correcting now!

      – Ignorance isn't bliss. It's very expensive! D.C. is proof!

      – "…Viagra to earthworms", now there's a thought. Sadly, Washington is full of "educated" folk who would "give it the old college try", speaking figuratively!

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