By James Kwak
This could be a midsize political battle in the run0up to the midterm elections, as discussed by The New York Times. The positions on both sides are too obvious to warrant repeating. If I recall correctly, the Obama administration hurt itself by underestimating the course of future unemployment a year ago when it passed the stimulus (most people were making the same mistake at the time), so now if you compare actual unemployment against original projections it looks like the stimulus had no impact. But that was a forecasting error and has nothing in itself to do with the stimulus itself.
Menzie Chinn has an overview post on the debate in which he argues that, at least from the standpoint of economists, it’s hardly a debate: the stimulus worked.
He points out that leading private-sector economic consulting firms are crediting the stimulus with significant impacts on GDP growth and employment. Here’s the money chart (originally from the Times):
Chinn discusses the types of models used to generate those forecasts, and competing models used by a few academics that yielded different results. He also points out that the CBO also estimates significant growth and employment impacts. If you want to pursue the matter further, he links to a couple of contrary arguments.
Of course, none of this will matter in the end because, as someone (Barney Frank?) said, you can’t get elected saying things would have been even worse without you. Unemployment will still be high in November and the Republicans will blame it on Obama. Voters aren’t going to believe macroeconomic models, don’t realize that unemployment is a lagging indicator, and will (with a little justification) think that Obama could have done more to create jobs.