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Obama's Clueless Liberal Critics
White House photo by Pete Souza
Conservative economist Bruce Bartlett—who shocked the GOP establishment by backing Obama—now says the far left is being too hard on the president’s stimulus plan.
When Barack Obama first proposed an economic stimulus package back in January, two of his top economists, Christina Romer and Jared Bernstein, warned that without it the unemployment rate would climb to 9 percent. With stimulus, however, unemployment would peak at just 8 percent. The national unemployment rate now stands at 9.5 percent and Obama himself has predicted that it will hit 10 percent.
I think the argument for more stimulus implicitly assumes that the bulk of stimulus funds have been paid out and done their work. However, the data show that very little of the stimulus has actually been spent.
I keep waiting for some Republican to recycle that old joke about Barry Goldwater: “They told me if I voted for him we would be in a war in six months; I voted for him and sure enough we were in a war in six months.” The new version would be, “They told me if I voted against the stimulus bill the unemployment rate would rise to 9 percent; I voted against it and sure enough the unemployment rate rose to 9 percent!”
But seriously, there is an ongoing debate among serious economists about whether the original stimulus bill was too small and therefore doomed to failure or whether it just needs more time to work. Those favoring the first view include Paul Krugman, a Nobel Prize-winning economist who thinks we need another stimulus as soon as possible. However, Romer, who now chairs the Council of Economic Advisers, says the stimulus is working just as planned and that no additional stimulus is needed.
I think the argument for more stimulus implicitly assumes that the bulk of stimulus funds have been paid out and done their work. In other words, the economy would be in far worse shape without the stimulus. Therefore, if $787 billion in stimulus wasn’t enough to keep the unemployment rate from rising well past the worst-case scenario of 9 percent, then it follows that vastly more money will be needed to bring unemployment down.
However, the data show that very little of the stimulus has actually been spent. Furthermore, economists often fail to note that the February package was composed of many different types of spending, some of which were never expected to have much stimulative effect. Extending unemployment benefits, for example, is justified on humanitarian grounds but doesn’t really provide stimulus.
For spending to be stimulative it must bring forth economic activity that otherwise would not have taken place. Income transfers that just put money in people’s pockets have a very low stimulative effect because much of the money will be saved. That’s why last year’s tax rebate, which was supposed to forestall an economic downturn, largely failed. (See a recent study by the Congressional Budget Office.)
The Romer-Bernstein paper noted this fact and said income transfers were very slow to have an impact on growth, needing two years to be fully effective. And even when fully effective, they raised the gross domestic product by less than a dollar for every dollar spent.
The sort of spending that really raises growth involves purchases of goods and services. The classic example is public works, which require buying concrete and steel and lots of other stuff as well as employing workers. But buying almost anything, as long as it is tangible, will work better than just giving away money. Romer and Bernstein estimated that this sort of spending raises gross domestic product by more than one dollar for every dollar spent almost immediately and within five quarters would raise it by $1.51 for every dollar spent.
In a recent briefing, CBO Director Doug Elmendorf estimated that only 24 percent of all the stimulus funds will have been spent by September 30. And 61 percent of that will go to low-impact income transfers; only 39 percent is for high-impact spending on highways, mass transit, energy efficiency, et al. By September 30, only 11 percent of all the funds allocated to such programs will be spent.
My fear is that Elmendorf may be optimistic. According to a government Web site set up to track the high-impact stimulus funds, as of June 26 only $157.7 billion has been made available and only $56.3 billion has been spent. But even this overstates the impact because the money that has been spent has only been spent in the sense that the Treasury has cut a check to some state or local government or other entity. It doesn’t necessarily mean that any workers have been hired as a consequence.
The Web site also says the Department of Transportation has only allocated $20.4 billion of stimulus funds, and of that a minuscule $441.2 million has been paid out—that’s million with an “m.” In a $14 trillion economy, that’s virtually nothing. And DOT programs are exactly the ones that most economists say have the strongest impact on growth.
This is why I think it would be a mistake to push forward with another stimulus: The first one really hasn’t had a chance to work yet. In any case, any shovel-ready public-works projects that were capable of gearing up quickly have already been funded. Any new projects will have to start from scratch, which means drawing up plans, buying land, doing environmental-impact statements, and so on. It will necessarily be years before such projects will have a stimulative effect on growth.
One must also be skeptical of the potential of any new stimulus given Congress’ well-known affection for pork. Indeed, the stimulative effect of the first stimulus bill was undermined by the necessity of accommodating many congressional spending preferences, which undoubtedly didn’t correspond to projects with the potential for the fastest construction since those projects were probably already funded.
Given that the Obama administration was at the pinnacle of its political clout in February and the obvious need for fast action constrained congressional earmarking, any new stimulus is bound to be much more pork-laden and, therefore, even less effective at stimulating spending and growth.
Finally, the political environment has changed since February. People are much more concerned today about large budget deficits. I am told that many so-called Blue Dog Democrats are insisting that if there is another stimulus that it must be “paid for” with spending cuts or tax increases. That, of course, would negate the whole point of stimulus.
We all know that sometimes we still have a headache an hour after taking some aspirin. But we know that too much aspirin can be dangerous, so we find some other way of relieving our pain. We are in the same position with stimulus today. More may not kill us any more than a few too many aspirin will. But it’s a bad idea. Sometimes you just have to wait for the medicine to work.
Bruce Bartlett was one of the original supply-siders, helping draft the Kemp-Roth tax bill in the 1970s. In the 1980s and 1990s, he was a leading Republican economist. He now considers himself to be a political independent. He is the author of Reaganomics: Supply-Side Economics in Action and Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy . His latest book, The New American Economy: The Failure of Reaganomics and a New Way Forward, will be published by Palgrave Macmillan in October.
The Right Dumps Carrie
Jacob Bernstein is a senior reporter at The Daily Beast. Previously, he was a features writer at WWD and W Magazine. He has also written for New York magazine, Paper, and The Huffington Post.
What's Joe's Problem?
Lloyd Grove is editor at large for The Daily Beast. He is also a frequent contributor to New York magazine and was a contributing editor for Condé Nast Portfolio. He wrote a gossip column for the New York Daily News from 2003 to 2006. Prior to that, he wrote the Reliable Source column for the Washington Post, where he spent 23 years covering politics, the media, and other subjects.
Geithner's Stock Plummeting
Jeff Madrick is a contributor to the New York Review of Books and a former economics columnist for the New York Times. He is editor of Challenge Magazine, visiting professor of humanities at Cooper Union, and senior fellow at the New School's Schwartz Center for Economic Policy Analysis. He is the author of Taking America, The End of Affluence (Random House) and The Case for Big Government.
The Supply-Side Pariah Returns
Bruce Bartlett helped develop supply-side economics while on the staff of Rep. Jack Kemp in the 1980s. In 2006 he was fired by a conservative think tank for writing a book critical of George W. Bush from a conservative point of view, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. His new book, The New American Economy: The Failure of Reaganomics and a New Way Forward, was published Oct. 13.
The GOP's Misplaced Rage
Bruce Bartlett helped develop supply-side economics while on the staff of Rep. Jack Kemp in the 1980s. In 2006 he was fired by a conservative think tank for writing a book critical of George W. Bush from a conservative point of view, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. His new book, The New American Economy: The Failure of Reaganomics and a New Way Forward, was published Oct. 13.
Absolutely. The media has done a very poor job of explaining just how much of the stimulus money has gone out and where.
It would also behoove members of the administration to talk to "us" about where the money has been spent and what results we're seeing.
I did read one article about the fact that the stimulus has keep hundreds of police and fire personnel in their jobs. Teachers who would otherwise have been laid off are keeping their jobs.
While not high profile this is the stimulus at work and people need to see that it is making a difference. Just ask those police and fire personnel and those teachers.
Where I live, in a small neo-con district in Texas, the Simulus money we have recieved so far is sparking industrial projects like no other that I've seen.
Just becuase we aren't already at a wonderful ideal economic situation, people complain.
What happen to the survery that said a majority of Americans are being realistic about the economic rebound and the President's performance?
My daughter was laid off--she is getting unemplyment and COBRA help. She buys groceries, gas, has doctor visits--the money she spends is working in the system. For example, when she buys groceries, the market buys produce, the producers buy raw material and so on--so every $ multiplies.
The stimulus is working, the problem is that businesses and states are tanking, and they are negating the effect that the stimulus is having.
If the stimulus hasn't kicked in by years' end we Democrats will be viewed as incompetent and will suffer significantly in the mid-terms.
An informative article. The title is somewhat dubious. I suspect his intention is to pull in the conservative reader and the title is his hook and bait. This is a worthy endeavor considering how many conservatives want Obama to fail.
...here's a thought...check out the latest economic stats on Brazil...auto sales are up by 13 per cent...new business licenses are up...tax collections are up...
Why?
The government has employed Reaganesque type tax cuts...
Let's see now, would that be the very same Brazil with the highest rate of inflation in the world?
On the contrary, Brazil has rejected the type of regressive policies put forward by reagan and the world bank. That's why their economy is rebounding not due to some pie in the sky right wing talking points.
hockeydog beat me to it. You'll want to compare their previous tax rate to ours today as well.
Reaganism and Thatcherism are dead in this world, except among American Republicans, who under the circumstances seem to be in a state of shock and hysteria, unable to believe that we're in another depression thanks to 30 years of their policies.
Obama should say that and keep saying it until the message sinks in. And I emphatically include Bill Clinton as a part of that Second Gilded Age.
Don't worry everybody, Joe Biden has been put in charge of the stimulus spending and he will inform us of progress.
HA!
While Mr. Bartlett might be "unemployable," as he states in his bio, he certainly has never had to live on unemployment. Unemployment benefits are almost never saved because because most people need them to pay for the essentials.
I think he was reffering to tax cuts and rebates that put money directly into the hands of citizens.
If you lined up all the economists who voted for Obama end to end, they would all point to a different direction and none of them would have read the Stimulous bill.
"This is why I think it would be a mistake to push forward with another stimulus: The first one really hasn't had a chance to work yet."
Thank you. The lack of patience demonstrated by the critics feeds also demonstrates the very 'I want it now' mentality that helped us get here.
This is the first time I heard a reasonable argument about why the Stimulus package has not "worked" yet.
It's amazing that both the media and politicians in general, including most Democrats, can't come up with the obvious: If the stimulus package has not
been yet spent, then it's not surprise that so far we haven't seen a substantial improvement in the overall economy.
As somebody mentioned in a previous comment, in our modern society with our short attention span and where we want everything NOW!!!, I am afraid that we don't have the discipline and patience to give the President's policies a chance to work.
"Extending unemployment benefits, for example, is justified on humanitarian grounds but doesn't really provide stimulus."
I question this. The unemployed almost certainly have to spend all of these benefits - mortgage, car payments, food, etc. This might not be new spending, but consider the impact on our economy if this spending were to stop.
Unemployment pays my bills, and nothing else. I am fine with that and the free time.
When my unemployment runs out, I'll get a job, where I'll get paid enough for my bills and then some discretionary spending on top of that.
Unemployment benefits are the exact opposite of stimulus, especially as the employment rate is concerned.
"Lack of Patience" Are kidding me! How about almost seven months of patience. It was the choosen one who said if the stimulus was passed that the "economy would see immediate relief" and thousands of jobs would be created from the onset of this bill. He also promised further jobs in the near future. Wow! The economy is still dismal at best and unemployment is almost at ten percent. Even die hard conservatives new when to abandon Bush but Obama backers will defend til the end which should be in 2012.
new = knew
How long does it take to turn around an economy in a spiraling downturn? I would give it more than 7 months, and as stated when the stimulus was passes, job creation is a lagging indicator - and will be the last piece of the puzzle to turn around. As you may or (most likely) may not have noticed - the housing market is turning around...this is a positive sign. Rome wasn't built in a day, and the mess that was created over the last 20 years won't be fixed in 4-12 months. Clean it up rtchap2
It took about two years during World War II, with much larger deficit spending than anyone would dare to try now--even though it is wartime, but not a world war.
Okay, if you want to "state facts" then state facts.
Today is July 8, 2009.
Obama was inaugrated January 20, 2009. (less than seven months)
The House approved the Stimulus Package on January 29, 2009 (less than seven months).
The Senate approved the Stimulus Package on February 13, 2009 (less than six months).
President Obama signed the Stimulus Package on February 18, 2009 (less than six months).
2,00o Transportation projects were awarded by April 13, 2009 (less than four months ago)
One of them, in New York, broke ground yesterday on their first stimulus project. (less than one full day ago).
The states and the DOT had to plan how to use and allocate the funding, obtain the appropriate permits and equipment, hire the appropriate staff . . . .
rtchap2--
"How about almost seven months of patience."
How about you get a clue. You seriously think that the world economy can rebound that quickly?
I don't expect anyone to give 100% approval rating of Obama. But it's ridiculous that some people will approve doctors being murdered in cold blood before they will even hint at something the President's doing to have potential.
Great article..And I pesonally thank you. I stopped watching the 24hrs news chatter because they have these so called experts who knows didley squat about anything.
I am willing the give the president more time. This man inherited more than a worsening economy. He got a country in shambles.Everything needs fixing.
Again thanks for a well thought out article. It makes a lot of sense to me.
Hey billybob before you correct spelling you must know how to spell yourself "and as stated when the stimulus was passes". Try was passed! Wow! Liberals! Always on the attack and always point out the shortcomings of the right but never realize their own. PASSES! Take away the "P" and thats what we get when we are uninformed voters!
troll
A hypocritical troll at that.
I take it that you're a conservative or at least an anti-liberal so I'll say this:
The Stimulus Plan may not be perfect; nothing mankind does will ever be 100% flawless. But unless someone can come up with a well-thoughtout alternative that is better than the Stimulus Plan... we won't have anything to do with it.
That's what I can't stand about the current Republican leadership... they always bring up questions and doubt but never have any answers or solutions.
You libtards like to use snappy catch phrases like "do-nothing" or the "Party of No." I wish Obama and his cronies would have taken the "do-nothing" approach. Look at how successful this "stimulus" has been. Rush to pass a bill that no Liberal read.
Such a rush to pass it but slow getting it out. Yeah, great plan. Everyone knows that the private sector is responsible for almost 98% of the economy, yet Obama handed out most of the money to those that got him elected.
If he would have stimululated the American taxpayer's pockets, the economy would rebound much faster. You liberals don't count. You fail to pay your taxes :) or read bills you propose :)...its true!
Your own remarks describe how liberals think. A well-thought out plan is what we should have received in the first place. Its Obama and the Donkey Party's stimulus and they are responsible for this piece of sh*t.
They shut the Repubs out in debating the stimulus. Everything the Donkey Party does these days is corrupt. Cap and Trade=huge energy tax on 100% of us. Obamacare=another tax increase.
Liberals love spending taxpayer's money. Tax and spend is now borrow, spend and tax later. Got to love how intellectual all you Libs claim to be.
I know what is coming. Liberals will start calling me names, bring up Bush, Cheney, Rumsfeld and that evil Sarah Palin and Rush Limbaugh. Next it will be about the Iraq War...yada...yada...yada. Please start thinking for yourselves and wipe the Obama magic from your eyes.
The man is a feckless leader and his policies have shown as much. I am offering a tutoring service for Liberals that will help you all learn how to read and pay taxes. However, social promotions are not a part of the program.
I could go on and on but you Libs are all the same: FOLLOWERS!
@Privateizs
I don't even know where to start but i'll give it a try.
Wow libtards that a great one but who are you making fun of is it, liberals or "retards" which by the way is politically incorrect (Sarah would be aghast). Obamacare, Obama magic? Guess liberals aren't the only ones with snappy catch phrases.
You then go on to state that they rushed too fast to get the bill passed that they didn't read it. But are too slow getting it out. So what should it be? Hurry up and slow down? Or maybe slow down and hurry up?
Your also right that they should definitley put more money in Republican pocket cause we all know that liberals are the only ones to not pay taxes or read their bills......it's true!
Your own remarks describe how Republicans think. Don't give a plan a chance to work and start criticizing before it's off it's feet. At least donkey sh!t is realitvely small compared to the monstrous droppings left by stumbling elephants.
Your right they definitly should have let the Republicans in on the stimulus debate, that way you could be complaining how they never do anything to stimulate the economy becasue the stimulus bill has been stalled.
I'll concede that there is defintily some corruption in the Dems but no means do they have a monopoly. Cap and trade = tax but it also equals to a tangible way to monitor enforce restrictions on pollution. Medicare = tax but it also equates to more money in other areas such as when your employer doesn't have to shell out for your health insurance. That doesn't always make it's way back to you but life ain't perfect.
And yes I'm going to bring up the Iraq war but just to show that liberals aren't the only ones who love to spend money. As far as the all-star list you named i don't need to say anything about them they speak for themselves.
Obama magic? Like Obama the magic negro? I am offering a tutoing service it's available to all racists and bigots it will help you learn not to blame others for your problems and to take responsiblity for yourself.
Signed
Tired of pompous asses
So liberals are the only ones who don't pay taxes? I'm guessing the people
It pisses me off when people try to be English teachers on a fourm read the content and comment or get the hell off.
It's spelled f-o-r-u-m... and nice run on sentence. Go back to junior high.
jk.
Wall Street is fundamentally broken and no amount of plugging the leaks will fix it, that only postpones the inevitable.
Until real changes are made, Geithner and the like will continue to manipulate the corrupt system to their own (and their friends) advantage.
Wow - never thought I'd find myself agreeing so heartily with a supply-sider.
Any business person who is smart will tell you that if a business is failing miserably throwing money at it will not solve the problem it will only buy you time. The US Automotive business was dead a long time ago because they did not change with the times they did business as usual. Americans need to realize that there is very little made in America any more including Harley's. You cannot continue to let people charge up CC and buy big house then lose their jobs and expect them to make it if you take away their only way out Bankruptcy. Back in the early 00 I filed chapter 7 it was simple I paid a lawyer a couple grand and boom it was done I walked away from thousands. Now you cannot you have to leave your house. So when we have all these empty houses and no one working then maybe they will go wow this thing called the stimulus did not work. Duh I could have told you it would not work. We need to lower interest rates just like Japan did for their people when they hit hard economic times. We need to make education affordable for everyone not just people of color and Mexicans everyone including those who come from households that make 50k or more a year. I got news for our f$@% up government $20 and hour is minimum wage if you are not making more than that in a family with children you are struggling. America needs to get creative fast and clean up this country. We need to bring back all of the jobs that we sent over seas and make those that are in our correctional institutes do them to pay for their crimes or they do not get fed or clothed. We need to come back to reality and quite letting big companies take all the money we need to put a cap on profits so that just a few get fat.
The nest stimulus should not go through Congress but use central bank financing from the Federal Reserve. Part of that can just be transfers to state and local governments facing bankruptcy, to maintain vital services, schools, hospitals, mass transit, and so on.
Part of it should be real public investment in long term projcets like high speed rail, energy infrastructure, small busines, cooperatives, research and development, etc. A green bank is a good idea and I hope it stays in the cap and trade bill, but in general we need a national investment and development bank.
And I am done replying to any post using the term "libtards". I am sick of this word, and of the people who use it.
Tell me about it.
So much of economic activity is based on building our collective confidence so everyone loosens the purse strings so to speak. Obama's election was the turning point that we needed. Nevertheless, it is difficult to convince those who control vast amounts of capital to return to the game full swing. We need those with restored confidence to step back into the ring and I believe they have been. Whether that is at the pace that is encouraging others to begin aggressively investing, it is hard to say. Obama can continue projecting a positive outlook and attempt to rally the masses back to the cash registers.
Thank you.
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