When you recognize that GDP growth in the second quarter of 2010 was only 2.4%, and could revise to just 1% after all the data comes in, this estimate from CBO is horrifying:

The massive stimulus package boosted real GDP by up to 4.5 percent in the second quarter of 2010 and put up to 3.3 million people to work, the nonpartisan Congressional Budget Office said on Tuesday.

CBO’s latest estimate indicates that the stimulus effort, which remains a political hot potato ahead of the November congressional elections, may have prevented the sluggish U.S. economy from contracting between April and June.

Economists surveyed by Reuters expect that revised numbers due out on Friday will show that the economy grew at an anemic 1.4 percent pace during that time period — less than the boost of at least 1.7 percent that the stimulus provided, according the CBO estimate.

So not only would the economy have contracted at extreme rates throughout late 2008 and 2009, but without the stimulus the economy would STILL be contracting. That’s a testament to how completely shaky the recovery is right now. And the scariest part is this final line: “CBO said it expects the effects of the stimulus to gradually diminish over the remainder of the year.”

It’s worth praising the Administration for getting a stimulus package through that has been the difference between growth and contraction. You can throw in the auto rescue and the manufacturing bleeding it staunched (auto supplier jobs are up higher than any time in the past decade) on the ledger of positives. You can even dissect John Boehner’s parade of horribles today, and correctly state that his party’s agenda would shove the country backward at the worst possible moment.

But if you want to be factual, you have to also say that the stimulus wasn’t enough to get the economy moving. Indeed, it brought us only to a situation of barely staying above water. And now it will start to peter out. And despite historically low interest rates for long-term debt, there is nothing happening on the fiscal side to take its place and fill the still-nagging demand shortfall. It’s not like we have nothing for workers to do from the standpoint of infrastructure.

The stimulus a depression. It prevented the double dip. It did not prevent a lost decade, which is where the economy is drifting.

David Dayen

David Dayen