Sunday, August 12, 2012

Grunwald tackles the myths about Obama's stimulus

I've mentioned before that Michael Grunwald is the go-to guy when it comes to understanding one of President Obama's signature accomplishments - the American Recovery Act. As a matter of fact, he literally wrote the book on it.

Just recently he published an article titled Five myths about Obama's stimulus that provides us with invaluable information for combating the lies and distortions that have been spread by not only the Republicans, but many on the left as well.

Here's a quick summary.

Myth 1: The stimulus didn't create jobs
Top economic forecasters estimate that the stimulus produced about 2.5 million jobs and added between 2.1 percent and 3.8 percent to our gross domestic product...

Job losses peaked the month before it passed. The jobs numbers that spring, while grim, marked the biggest quarterly improvement in almost 30 years.
Myth 2: The stimulus was full of waste, pork and fraud 
...the stimulus was also the first modern spending bill with no official legislative earmarks, the usual definition of “pork.” And after experts warned that 5 to 7 percent of the money could be lost to fraud, investigators documented only $7.2 million in losses through 2011, about 0.001 percent.
Myth 3: The stimulus should have been much bigger
...there was no way Obama could have gotten another dime out of Congress...

Everyone involved in the negotiations — including liberals who favored a larger stimulus — agrees that Obama got as much as he could get.
Myth 4: Unlike the New Deal, the stimulus will leave no legacy
The stimulus was the biggest and most transformative energy bill in history, pouring an astonishing $90 billion into record expansions of every imaginable form of clean energy, from renewables to electric vehicles. It included $27 billion to computerize health care. Its Race to the Top was a landmark in education reform. Its high-speed rail program was the most ambitious transportation initiative since the interstates. It extended high-speed Internet to underserved communities, a modern twist on the New Deal’s rural electrification, and modernized the New Deal-era unemployment insurance system. And much more.
Myth 5: The stimulus showed that Obama can't legislate 
The deals that got the Recovery Act done served notice that after campaigning as a change-the-system outsider, Obama would govern as a work-the-system insider. He was pragmatic enough to recognize that a bill that can’t pass Congress can’t make change.
So how's that for a take-down of everything from the right's lies about ineffectiveness and corruption to the left's handwringing over its size and impact?

But that last line is the money quote..."a bill that can't pass Congress can't make change." Its why folks like Paul Krugman make great economists, but would be lousy politicians.

6 comments:

  1. Nitpicking here, but #3 isn't a myth. It's a judgement call.

    It's a matter of reasonably clear economic record that, for the stimulus to be maximally effective, it should have been bigger.

    Now, that wasn't politically possible, as you and Grunwald point out - and I think even those like Krugman who pointed out the size mismatch were aware of this.

    So the myth should properly be 'the stimulus could have been bigger, and the Obama administration left money on the table.'

    It's an interesting exercise trying to work out under what conditions a larger stimulus could have been proposed and passed, but I'm not sure it does much good!

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    1. That's a really good point.

      Although where Krugman articulated an awareness of the limits is something you'd have to point out - I haven't seen it.

      One other thing. Because Grunwald is focused on the ARA, he also doesn't mention that there was a 2nd stimulus that took the total to between $1 and 1.7 trillion.

      http://www.washingtonpost.com/blogs/ezra-klein/post/the-real-price-tag-for-stimulus-between-1-trillion-and-17-trillion/2011/08/25/gIQA2Cc41Q_blog.html

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    2. Perhaps this is a decent enough example - you may find he lays too much emphasis on the responsibilities of the executive branch and too little on calling out the legislative branch (I'd agree FWIW: the only reason to put pressure on the Obama administration to do more is if their intransigence is the major factor in the state of play. With this Congress, that ain't true).

      But at least he shows he's aware of the Congressional angle.

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    3. Thanks for finding that.

      But I was actually looking for something where Krugman acknowledged that Obama got all that was possible in the ARA. From what I've read, he never acknowledged the reality of the politics on that one.

      I wouldn't fault him for that if he'd simply write about the economics of the situation. But he was pretty hard on Obama for not getting something more - which was never going to happen. Not only that - I'd suggest that timing was as important as amount. We not only needed it to happen - it needed to get done FAST.

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    4. Well, I guess that's a judgement call which be doesn't necessarily believe - that Obama got all he could. And we'll never know. He'll point out the obvious: more wasn't asked for, and Romer's higher estimate of the required funding was sidelined. We'll never know.

      I don't think he's doing anything out of order in calling the Administration to account for that part of things - they did, after all, say that this would be enough money...

      But, yes, the objective political realities of ARRA meant it needed to be done yesterday, and it was. That's good. If Obama had been resisting Congressional calls for more stimulus I think Krugman's critique would have more bite.

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    5. We'll never know.

      But that gets back to exactly what Grunwald's point was...we DO know. Obama got as much as he could possibly get.

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