Why Does Simon Johnson Say The Stimulus "Worked"?

Is it really time to declare that the first stimulus "worked"? It's been three months since the stimulus bill passed, and the administration itself has said it will take far longer to see it bear fruit. But this doesn't stop Simon and Johnson and Peter Boone from declaring mission accomplished on the New York Times Economix blog: "The First Fiscal Stimulus Worked."

Huh? It looks to me like they're in search of a provocative hook to talk about the second part of their post -- should we have a second stimulus? -- which is perfectly understandable. But the  evidence they present in favor of the proposition that the first stimulus worked is woefully thin, and even the evidence they do have should be laden with various ifs, ands and buts. Their argument:

How did the Obama team pull this off? In part, it was with the huge fiscal stimulus enacted in February. While increased government spending feeds through into the economy only slowly, the big push to spend demonstrated that the government was willing to borrow heavily to offset any likely fall in spending by households and firms. This in turn reassured everyone that the economy could not decline too far or too fast.

And that's pretty much it.

I guess if they're willing to concede that the actual spending of the stimulus didn't have much to do with the success of the stimulus, it might not be worth talking about stimulus spending at all. But since the first quarterly report on the stimulus was released yesterday, I will quickly note that about $88 billion dollars of the stimulus has been obligated, and about $28.5 billion of it has been spent. That's about the 3.6% of the $787 billion total.

That's neglible. And while I take arguments about confidence seriously, if you really think the stimulus successfully rebuilt confidence after 3.6% of the whole thing has been spent, you might want to consider ways to build confidence without committing to spend the other $760 billion. $28.5 billion dollars could be used to throw a lot of great, confidence-boosting parties!

But, more importantly, it isn't obvious that confidence has been rebuilt. I look at the consumer confidence index data, and I see a nice bump up for April but nothing that suggests we're back in the halcyon days of a year ago.



And, most importantly, there's no evidence that this boost in confidence has anything to do with the stimulus. The best polling data I know suggests quite the opposite: