Jon Cohn asked some lefty economists to imagine a world in which we'd passed a $1.5 trillion stimulus. What, he wondered, would be different? How much better off would the economy really be?
It's a good question, and I think one of the political problems right now is that the Obama administration didn't get the counterfactual into the conversation early enough: They decided to call $800 billion pretty much what they wanted rather than a downpayment on what they needed.
So it's left to the blogs. Cohn gets two economists on the record. Dean Baker, president of the Center for Economic and Policy Research, says that a rough calculation would just multiply the impact of the actual stimulus by two: "The Congressional Budge Office estimates that the stimulus added 1.7-4.5 percent to GDP and that it lowered the unemployment rate by 0.7-1.8 percentage points. If it were twice as large, assume GDP growth in the 3.4-9.0 percent range and the drop in unemployment in the range of 1.4 -3.6 pp. In other words, the unemployment rate today would be between 7.7 percent and 8.8 percent." He also thinks there's some chance it would have "kicked off self-sustaining growth with a bigger round of investment coming on board and maybe even some real wage growth."
Larry Mishel, president of the Economic Policy Institute, agrees that more stimulus would've meant more jobs. Maybe as many as 5 million of them. But he also sounds a cautious note we were hearing back in 2009, too: "Though the economy needed that size stimulus, I’m not sure there were good vehicles for executing such a stimulus," he says. "I’m not sure I would have wanted to double the tax cuts, and it wasn’t possible to double much of the investments and get them underway in this time period. We could have given states more relief. And, we could have extended the time period of much of the stimulus elements--unemployment insurance, investments, state relief, etc.--so we wouldn’t need to renew than now."
I'd make one further point: You could certainly imagine a stimulus package that was more politically effective than the one we passed -- even if it was less economically effective. A payroll tax holiday and a doubling of Social Security checks might've done less to help the economy and make needed investments, but it would've been more visible to most of the country, and it would've created a larger political constituency in favor of the program.
As it is, you can make a good case that the stimulus will change America in important and beneficial ways, but it's equally clear that lots of people won't notice those changes happening, or know who to attribute them to once they're done. How many folks are seriously going to walk into a doctor's office in 2011, see a new computerized records system, and think to attribute it to the American Recovery and Reinvestment Act of 2009?
Photo credit: Ryan McFarland/Zieak.
September 3, 2010; 8:50 AM ET
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