The Recovery Act Worked.

[Life Long Dem]

The Impact of the Recovery Act, In a Few Easy Charts

by Jared Bernstein

Aug 31, 2011







Sources: GDP: BEA, Payrolls and unemployment, BLS

The Impact of the Recovery Act, In a Few Easy Charts

by Jared Bernstein

Aug 31, 2011

So there I was, quietly working on a piece on the economic impact of the Recovery Act when I stumbled on a few simple graphs that I think tell a very compelling story.

It’s an important story too, both in terms of looking backwards and forwards.

Republicans constantly ply the talking point “discredited stimulus” in the interest of blocking any similar ideas, like some of those I expect to hear come out of the President’s jobs package. But the evidence shows otherwise. The evidence shows the stimulus (and other stimulative measures, including those of the Fed) worked, but ended too soon, before the private sector was ready to walk on its own. The evidence shows we need to do more of these sorts of policy interventions.

I know—this ain’t about the evidence. But I will never accept that condition and neither should anyone else. That’s the way societies decline and I’d kind of like to avoid that.

The first graph shows the growth in real gross domestic product (GDP) from 2007 up until the last quarter. The next picture shows job growth over the same period in both the total job market and excluding government jobs, since the temporary influx of Census working in 2010 distorts the overall series for a few months.

While these are very simple pictures of fundamental economic variables, and while there are always many moving parts influencing such trends, they a) present remarkably compelling evidence against the “failed stimulus” case, and b) show that we need to do more of these types of interventions.

When the bill was signed in February 2009, GDP growth was almost unprecedentedly negative—down 9% in the previous quarter (2008q4). But as the figure reveals, the economy immediately between to contract less quickly, and growth turned positive by mid-2009. We see the same pattern in job growth, which also reversed course soon after passage, and broke zero—net job growth—in March of 2010 (the addition and subtraction of Census workers that year distort the picture somewhat, but they’re not included in the private sector data, which present a clearer view of what happened).

Unemployment always lags growth by at least six months, but a few months after ARRA kicked in, it stopped growing.

But that’s only half of what these simple graphs show. The other piece of information they yield is even more important. As the stimulus fades, the positive trends begin to falter: both GDP and job growth slow significantly, and unemployment stagnates at a highly elevated level.

The message of these three simple graphs is itself disarmingly simple: the stimulus worked. It prevented recession from becoming depression. It just ended too soon.

And that’s why the President’s new jobs agenda is so damn important.

http://jaredbernsteinblog.com/the-recovery-act-worked-in-a-few-easy-charts/

‘the recovery act worked’

[drm604]

1. K&R

:kick:

[Harmony Blue]

2. Based on the data the Recovery Act indeed worked

what will be eternally debated is if more was needed?

[dionysus]

3. i don't think there's a debate over whether more was needed, the debate is could we have gotten more

it was like pulling teeth to get what we had

[amborin]

5. WHERE? 40% of the stimulus was USELESS tax cuts to please Rethugs

and for that, Obama got ZERO Rethug votes

the stimulus passed without their lousy votes

[vi5]

6. I'd settle just for people pointing this out...

O.K. so we are not going to get more. But that's no reason to not have "our side" point out at every single opportunity, like a well oiled message machine, that this worked.

Maybe if for every 2 times Obama or Reid or Pelosi or any of the other Democrats who manage to get their mugs on TV and/or talking head chat shows mentioned belt tightening or cost cutting, or shared sacrifice, they also mentioned that the stimulus worked and pointed out this fact, then maybe we'd get a sizable popular headwind and public support.

But when not only DON'T they do this, but instead talk about things that don't work and that in fact HURT the economy, it's hard to really convince people that you know....the thing that worked actually worked.

[Harmony Blue]

7. Good point

The data is clear that austerity is not the way to go, and Greece is an example too. I would like Democrats to embrace this data and let the Republicans try to argue against it.

[RaleighNCDUer]

9. Could we? I didn't see the WH sending out their proxies to pound

the public with the NEED for a bigger, more targeted stimulus. The public will only respond to what they are offered, and the WH offered a weak-assed plan, while the Republicans were hammering on it 24/7. If the public (not us isolated politics geeks) understood the benefits of a stronger plan - that investment is NOT spending - they wouldn't have let the Republicans water it down and turn 1/3 of it into tax cuts.

Put it in simple terms for public consumption: Is re-tooling a factory, to make it more efficient and profitable, spending or an investment? Is paying sending your kid to college spending, or an investment in their future?

That's the pisser about this - it didn't HAVE to be "pulling teeth" - and there's another one: Would you rather spend $150 on semi-annual dentist visits, or $2600 for root canals and bridges?

Sometimes you have to spend now to benefit later.

WHO WAS HANDLING THE DEMOCRATIC MESSAGE?

[vi5]

12. Who was handling the Democratic message?

Unfortunately one of the most important people was someone who was more concerned with his legacy as some sort of post-partisan, transitional figure who surrounded and continues to surround himself with an impenetrable bubble of sycophants and Wall Street shills than he was/is with doing the right thing. Someone who seemed/seems to feel that "bipartisanship" and "compromise" are his lifetime pass into the good graces of the DC cocktail party circuit, and who seemed/seems to place that as his priority above all else.

[vi5]

4. Wow, if only we had someone who could make this case....

If only in a perfect world we had control of several large bodies of government which would give us a bully pulpit from which to point out these facts and make this case to the American people that this worked, and that we need more of this, and that doing the opposite of this (austerity and cost cutting) causes the opposite effect.

Oh, if only we weren't so powerless and without control of anything in our federal government.

[amborin]

8. yes, but hard to prove a negative; also, as Krugman predicted: "a lot of bucks for not much bang"

back in 2009, K said this:

"But only about 60 percent of the Obama plan consists of public spending. The rest consists of tax cuts — and many economists are skeptical about how much these tax cuts, especially the tax breaks for business, will actually do to boost spending. (A number of Senate Democrats apparently share these doubts.) Howard Gleckman of the nonpartisan Tax Policy Center summed it up in the title of a recent blog posting: “lots of buck, not much bang.”

The bottom line is that the Obama plan is unlikely to close more than half of the looming output gap, and could easily end up doing less than a third of the job."

http://krugman.blogs.nytimes.com/2010/07/28/how-did-we-know-the-stimulus-was-too-small/

[WI_DEM]

10. unfortunately most people buy into the GOP talking points because the unemployment rate

is still so high and because the 'recovery' has been so weak.

[Harmony Blue]

11. Perception definitely can trump facts

But to defeat this perception these facts must be repeated constantly.

[ChandlerJr]

13. Nice charts and graphs, may I just point out 1 glaring problem?

jaredbernsteinblog: Alexa traffic rank 289,306

Drudge Report: Alexa traffic rank 426

Foxnews.com: Alexa traffic rank 173

Anyone else see the problem?

[Life Long Dem]

14. And the BLS is 5,571

http://bls.gov/