Can Anybody Explain What the Stimulus Actually Did?

The Recovery Act was designed to target economic production over job creation. Today quarterly GDP growth is 5.7%, and the unemployment rate is 9.7%. So, naturally, the stimulus being judged for its failure to create jobs rather than credited for boosting economic production. Why?

Ezra Klein argues the administration has struggled to explain the stimulus because the stimulus' purpose has been shifting: it's about production! no, infrastructure! no, jobs! demand! and so forth. There are other reasons why the administration has slogged through economic PR...

First, 10 percent unemployment would hurt any administration's economic message -- period/the end/full stop. Second, first point notwithstanding, the administration badly underestimated the impact the recession would have on joblessness. The CEA warned in early 2009 that unemployment would hover around 9 percent without the stimulus; with the stimulus, it passed 10 percent. This miscalculation hurt the White House last year by keeping them from calling for a larger, more job-oriented, stimulus, and it continues to plague the administration by undercutting its authority on job creation and the economy this year.

Third even the new organizations considered objective and mainstream have struggled to explain the stimulus and its frustrations. I think the fine reporters at The Washington Post mislede with sentences like this:

The giant economic stimulus package enacted a year ago has helped stabilize the economy but has not made much of a dent in the nation's vast unemployment.

The Obama administration is acknowledging that its program of spending cuts and tax breaks has yet to ease joblessness, and White House officials are increasingly engaged in shaping the details of new legislation to boost job creation.

I guess it depends what you understand by "made much of a dent" and "yet to ease." It doesn't really matter who you listen to about the job creation numbers -- the administration says about two million jobs "created or saved," others say much fewer, I think it's at least hundreds of thousands -- but it's clear the stimulus bill made a dent in unemployment numbers and eased the jobless rate. No, it obviously hasn't stopped U1 from climbing to 10 percent. But how can we know that 10 percent is not a dented, or eased, unemployment figure? There is no parallel universe in which we can play out a no-stimulus (or Republican stimulus) scenario for the last twelve months. I know what WaPo is trying to say -- and I think Alec MacGillis is a particularly great reporter -- but even seemingly anodyne sentences like this make the stimulus appear to have been a total wash for jobs; yet I don't know any nonpartisan sources who would agree with that interpretation.

Bonus: It keeping with the thesis of the articles, here's credit where it due: WaPo has a great graph of the stimulus' shifting focus


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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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