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Say It With Me: The Stimulus Worked

It’s a testament to the failures of White House communication, and Democratic messaging generally, that some of the greatest successes of the early Obama Administration are considered in the public mind as failures. His counter-terrorism strategy has simply been more effective than his predecessor, yet the conservative megaphone has trash-talked it endlessly, and the public picked up the cues. On the stimulus, the vast majority of Americans have deemed it a failure, but the nonpartisan CBO report released today shows that it has worked about as well as anyone could expect.

CBO estimates that in the fourth quarter of calendar year 2009, ARRA added between 1.0 million and 2.1 million to the number of workers employed in the United States, and it increased the number of full-time-equivalent jobs by between 1.4 million and 3.0 million […]

CBO also estimates that real (inflation-adjusted) gross domestic product (GDP) was 1.5 percent to 3.5 percent higher in the fourth quarter than would have been the case in the
absence of ARRA.

The table shows that the unemployment rate is between 0.5-1.1% lower than it would have been without the stimulus.

And if you look at page 4 of the report, you see that once again, CBO estimates that the direct government purchases in the stimulus have the highest “multiplier” effect, meaning that the dollars get cycled through the economy, while the tax cuts for higher-income people (basically the AMT patch that was incorporated into the stimulus) and the first-time homebuyer’s tax credit, which also tends to go to higher-income people, have among the lowest multipliers. The very lowest multiplier? Corporate tax cuts affecting primarily cash flow. What’s more, the stimulus is primed to have its greatest impact this year.

The CBO document is simply a blueprint for how positively the stimulus affected the country. But there are two reasons why it will fall on deaf ears. One, the White House, while having gotten better on this of late, particularly by detailing the hypocrisy of Republicans trashing the stimulus and then begging for its money, lost the plot somewhere along the line. And that feeds directly into reason #2, which is the fact that the stimulus wasn’t big enough for the task at hand. Proving a negative – that the stimulus saved things from being worse, even though it didn’t make things miraculously better – is very difficult. And by keeping the total cost of the stimulus too low, sacrificing large chunks of it to tax cuts, and then projecting better than expected unemployment figures as a result, the Obama Administration poisoned their own messaging. They should not have to defend the program as vociferously as they would have if they simply fit the solution to the problem.

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David Dayen

David Dayen