Let's Put This Run Down Economy in Reverse. It'll be Fun To Drive it Off a Cliff One More Time
When President Obama unveiled an array of new tax-cut and spending proposals last week, one word was noticeably missing from his speeches: “stimulus.” Republicans, meanwhile, energetically set about decrying the plan as “more of the same failed ‘stimulus’ ” and as simply a “second stimulus”—as if the word itself were a damning indictment. The idea of using countercyclical fiscal policy to help get a weak economy moving is hardly radical. But in Washington stimulus has become the policy that dare not speak its name.Anyone out there ever do the best they could and things didn't work out perfectly. Maybe even prevented a disaster from being an even deeper tragedy. That is what Democrats did. Republicans - the ones in charge of Congress for six of Bush eight years in office - created the catastrophe yet also claim they know how to solve it. Why did they trash the country they claim to love so much in the first place.
This wouldn’t be surprising if we were talking about a failed program. But, by any reasonable measure, the $800-billion stimulus package that Congress passed in the winter of 2009 was a clear, if limited, success. The Congressional Budget Office estimates that it reduced unemployment by somewhere between 0.8 and 1.7 per cent in recent months. Economists at various Wall Street houses suggest that it boosted G.D.P. by more than two per cent. And a recent study by Mark Zandi and Alan Blinder, economists from, respectively, Moody’s and Princeton, argues that, in the absence of the stimulus, unemployment would have risen above eleven per cent and that G.D.P. would have been almost half a trillion dollars lower. The weight of the evidence suggests that fiscal policy softened the impact of the recession, boosting demand, creating jobs, and helping the economy start growing again. What’s more, it did so without any of the negative effects that deficit spending can entail: interest rates remain at remarkably low levels, and government borrowing didn’t crowd out private investment.
Politically, however, none of this has made any difference. Polls show that a sizable majority of voters think that the stimulus either did nothing to help or actively hurt the economy, and most people say that they’re opposed to a new stimulus plan. The hostility has numerous sources. Many voters conflate the stimulus bill with the highly unpopular bailouts of the banking sector and the auto industry; Republicans have done a good job of encouraging such misconceptions, as when Representative Mike Pence, of Indiana, referred to the “bailout stimulus.” Also, the stimulus—which, to begin with, was too small to completely offset the economy’s precipitous drop in demand—was oversold. The Administration’s forecasts about the recession (particularly regarding job losses) were too optimistic, and so its promises about what the stimulus would accomplish set the public up for disappointment.
But the most interesting aspect of the stimulus’s image problems concern its design and implementation. Paradoxically, the very things that made the stimulus more effective economically may have made it less popular politically. For instance, because research has shown that lump-sum tax refunds get hoarded rather than spent, the government decided not to give individuals their tax cuts all at once, instead refunding a little on each paycheck. The tactic was successful at increasing consumer demand, but it had a big political cost: many voters never noticed that they were getting a tax cut. Similarly, a key part of the stimulus was the billions of dollars that went to state governments. This was crucial in helping the states avoid layoffs and spending cuts, but politically it didn’t get much notice, because it was the dog that didn’t bark—saving jobs just isn’t as conspicuous as creating them. Extending unemployment benefits was also an excellent use of stimulus funds, since that money tends to get spent immediately. But unless you were unemployed this wasn’t something you’d pay attention to.
The stimulus was also backloaded, so that only a third was spent in the first year. This reduced waste, since there was more time to vet projects, and insured that money would keep flowing into 2010, lessening the risk of a double-dip recession.
Boehner(R-OH) Invites Lobbyists To Help Form GOP Agenda In Intimate Meeting At His Office
As the Wonk Room’s Pat Garofalo has documented, congressional Republicans have “organized a pow-wow with lobbyists in order to devise a strategy” for nearly every piece of major legislation over the past year, from health care reform, to Wall Street reform, to climate change, to a jobs bill.
