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It's Like Sticking Your Toe Into the Ocean and Being Surprised That Your Hair Is Still Dry

Brad DeLong is tired of people who assume that the poor economic performance of the past two quarters is an argument against, rather than for, the stimulus. He responds by going back to the original Council of Economic Advisers report laying out the argument for, and projected schedule of, stimulus spending:

Jared Bernstein and Christy Romer constructed extremely crude estimates of the delta-effect of the stimulus package on the economy by taking when they thought the different components of the $787 billion would be spent and how long it would then take for the government spending to have an impact on the economy. Their estimate is that we saw the effect of $0 (zero) (none) (nada) dollars of the stimulus package on the economy in the first quarter, that we saw the effects of only $14.5 billion in the second quarter, and that we are about to see the effects of $38.6 billion now in the third quarter as the effects of the package ramp up to their peak in the fall of 2010, when we will see $82.1 billion of stimulus spending hit the economy.

To say that what happened in the second quarter means that "the last few hundred billion dollars have had virtually no effect" is like sticking your toe into the ocean and pointing out that your hair is still dry...

Also, this post of Brad's made me laugh. Not only is it funny, but it's funny in a way that only Brad DeLong is funny.

By Ezra Klein  |  July 13, 2009; 11:01 AM ET
Categories:  Economic Policy  
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Comments

Plenty of people opposed the stimulus for precisely the reason that Ezra lays out: it's going to take so long to spend the stimulus funds that they won't have any effect on recovery. Indeed, they're likely to be counter-cyclical.

Also, Delong is ignoring the fact that the people who first insisted that the stimulus would be working by now were the Obama administration. Romer and Bernstein predicted that the stimulus would lead to an unemployment rate of 7% *by this time*, whereas without the stimulus, unemployment would rise by now to 9%. (Of course, we got the stimulus, and unemployment has risen to 9.5% anyway.)

The Obama administration lobbied for the stimulus precisely on this basis. Delong and Ezra are basically saying that people are stupid if they believed what the administration said. That may be true, but it hardly inspires confidence.

Posted by: tomtildrum | July 13, 2009 11:43 AM | Report abuse

tomtildrum:

Page 7 of Christina Romer's report on Jan. 7 -- two weeks before the president was even inaugurated, before congress had even revised the proposed stimulus plan, and before she had seen the Q4 GDP and jobs data -- says this:

Because it takes time to carry out new spending programs authorized by
legislation, we expect the jobs created by spending on infrastructure, education, health, and energy to be concentrated in 2010 and 2011.

http://otrans.3cdn.net/ee40602f9a7d8172b8_ozm6bt5oi.pdf

Posted by: MisterSavannah | July 13, 2009 1:35 PM | Report abuse

He doesn't want more stimulus. He wants more Government control. The more wealth allocated by politicians the more power they have and the more influence like-minded media types think they will have if only they could get rid of those pesky lobbyists and obnoxious individuals.

Posted by: fallsmeadjc | July 14, 2009 12:00 AM | Report abuse

you can't see a lot of the stimulus money because it is lining the pockets of private individuals! Take the clients of the son of David Obey, His son is a lobbyist and somehow a way was found to help him...oh, y ou didn't know???

Posted by: truck1 | July 14, 2009 6:20 AM | Report abuse

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