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Posted at 3:05 PM ET, 02/14/2011

The stimulus was small

By Ezra Klein

At least when compared to the competition:

This paper studies the patterns of fiscal stimuli in the OECD countries propagated by the global crisis. Overall, we find that the USA net fiscal stimulus was modest relative to peers, despite it being the epicenter of the crisis, and having access to relatively cheap funding of its twin deficits. The USA is ranked at the bottom third in terms of the rate of expansion of the consolidated government consumption and investment of the 28 countries in sample.

On the same point, Paul Krugman posts this graph looking at total public spending -- that is to say, federal spending, which went up, but also state and local spending, which went down -- in recent years:

fredgraph (5).png

"Looking at this graph," Krugman asks, "if you didn’t know there had been a 'massive' stimulus, would you even have suspected that there had been any stimulus at all?"

By Ezra Klein  | February 14, 2011; 3:05 PM ET
Categories:  Stimulus  
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For that matter, would you have suspected that we had a President who "loved" increasing spending any more than the last President?

Posted by: skeeJay | February 14, 2011 3:18 PM | Report abuse

The graphic underscores our reliance on tax cuts for "stimulus" despite their more limited effects. As a percent of GDP, revenue collection down to a level not seen since 1950 and we would need a one-third increase to reach the level under Clinton. Yet so-called leaders, lacking any courage, talk about cutting the budget and not about increasing taxes.

Posted by: pjro | February 14, 2011 3:24 PM | Report abuse

You (and Krugman) should note that the truncated scale exaggerates the rate of increase.

Posted by: jtmiller42 | February 14, 2011 3:27 PM | Report abuse

Really? Really? You can really post a graph like that as a defense of the stimulus not being large enough? If government spending is such a wonderful cure how the heck did we get so sick in the first place. You and Krugman do realize that shows approx 100% increase in spending over 10 years right?


Posted by: mattjohansen | February 14, 2011 3:49 PM | Report abuse

or conversely expenditures were going up faster than was necessary in non-recessionary years.

Posted by: visionbrkr | February 14, 2011 4:00 PM | Report abuse

@mattjohansen wrote:
"If government spending is such a wonderful cure how the heck did we get so sick in the first place."
Perhaps by cutting taxes by a trillion dollars all while starting 2 wars that weren't paid for?
As for the doubling in 10 years, are you saying it hadn't doubled in 10 years? If so, please provide your proof.

Posted by: rpixley220 | February 14, 2011 4:03 PM | Report abuse

Even according to this ridiculous graph, we're still over by about $200 billion.

Posted by: krazen1211 | February 14, 2011 4:45 PM | Report abuse

No Krugman is right of course. The states, some of which are really, actually, and truthfully only kept out of bankruptcy because they ARE states, should have spent even MORE money too so as to make the Federal expenditure that much more effective!

It's easy to understand, in a bizarro Krugman sort of way.

Posted by: johnmarshall5446 | February 14, 2011 4:57 PM | Report abuse

@rpixley220 the sickness I referred to, that which the stimulus was directed to alleviate, was the housing crash/financial meltdown. I realize that sickness is bout of stomach flu compared to the ravenous cancer that is the debt - but Krugman picked this infirmity to discuss not I. So the argument proffered by Krugman and seconded by Klein is that more govt spending, read antibiotics, would have cured the flu more quickly. I just point out that we have been administering so many antibiotics that it is unthinkable that we got ill in the first place (please note the deft switch to sarcasm).

Not sure where you are going with your trillion dollar tax cut statement, you are aware that tax cuts do not cost the govt correct?

Posted by: mattjohansen | February 14, 2011 5:04 PM | Report abuse

access to paper at

The modest Federal stimulus was directed at the downturn in GDP and jobs. The TARP was directed at the financial meltdown. Nothing much was directed at the housing crash.

Krugman's point, and Klein's, in this instance, is not that the stimulus should have been one size or another, but that there was, on net, no stimulus at all.

Posted by: bdballard | February 14, 2011 5:21 PM | Report abuse

@bdballard - all three commission reports point to housing market as major component of the financial crisis so I linked them. The stimulus was $787 Billion, roughly 1/2 of Canada's GDP, so I think the term moderate is debatable. Krugmans point (in this instance) was that state and local funding decreases largely offset the stimulus. Again my question remains, if govt spending, stimulus, is the cure - how did we get sick in the first place? The only answer for a statist is that the govt spends correctly its citizens do not. I reject that answer.

Posted by: mattjohansen | February 14, 2011 5:44 PM | Report abuse

"if you didn’t know there had been a 'massive' stimulus, would you even have suspected that there had been any stimulus at all?"

If the corresponding figure for revenue had been laid in, then yes, it would have been quite obvious.

Posted by: justin84 | February 14, 2011 5:45 PM | Report abuse

In all seriousness, this is a POV question. The economy is doing quite well in general, but employment is not and won't for the foreseeable future. Housing was at unprecedented and unsustainable levels, so no one should desire a return to previous levels.

Krugman doesn't believe in the concept of inflation, so he thinks unempolyment is the single most important factor in the economy.

Posted by: johnmarshall5446 | February 14, 2011 6:18 PM | Report abuse

@mattjohansen wrote:
"Not sure where you are going with your trillion dollar tax cut statement, you are aware that tax cuts do not cost the govt correct?"
This in a nutshell is the dilemma facing people who are serious about the deficit and those who are woefully misinformed.
How exactly do tax cuts *not* cost the govt? If I reduce your income by 20% does that not have a 'cost' to you?
So that trillion dollar tax cut Bush pushed through, using that *evil* budget reconciliation process by the way, did in fact *cost* the gov't a trillion dollars. Prior to that cut being enacted the gov't would have had an extra trillion dollars in tax revenue.
It would be fair to argue that the tax cuts provided a stimulus to the economy by putting money in people's hands. You didn't choose to make that point - which is probably good because tax cuts are among the worst ways to stimulate the economy when compared to infrastructure spending, unemployment benefits, food stamps, etc.

Posted by: rpixley220 | February 15, 2011 10:59 AM | Report abuse

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