US economists think the stimulus saved jobs

Justin Wolfers has an interesting snippet in the New York Times:

Recently each of these eminent economists was asked whether the unemployment rate was lower at the end of 2010 than it would have been without the stimulus bill. Of the 44 economists surveyed, 37 responded, yielding a healthy response rate of 84 percent.

Among those who responded, 36 agreed that the stimulus bill had lowered the unemployment rate, while one disagreed. That lone disagreeing economist, Harvard’s Alberto Alesina (who was one of my thesis advisers), has been a virulent opponent of the stimulus, although the research that he’s based this upon has come under sustained criticism, particularly from the International Monetary Fund, which views the study as flawed.

Below is the latest version of the expected unemployment impact of the great recession and the expected impact of the Obama package in unemployment terms. (If anyone has a more recent version please let me know).

With Without Recovery Plan sept 2013

So our 36 economists have some explaining to do. Mainstream macro theory made a series of predictions and is summarised in that graph – reality unfolded in a very different way. So now how were they wrong in 2009 and what have they done to improve their approach since then?

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18 Responses to US economists think the stimulus saved jobs

  1. US economists think say the stimulus saved jobs

    Mum always said if you tell yourself a lie is true often enough, you will eventually believe it. Socialism is the art of political deception. Its so effective, they deceive themselves, otherwise known as an “own goal”.

    To know Krugman is to know leftism. The response to spectacular failure is to double down on stupid and hope nobody notices.

  2. George Brandis thanks for NOTHING

    Recently each of these eminent economists was asked whether the unemployment rate was lower at the end of 2010 than it would have been without the stimulus bill.

    How on earth can anyone possibly answer that question, given the myriad counterfactuals that could have prevailed?

    No wonder respect for economists has fallen through the floor. Most of them talk nothing but rubbish.

  3. Bruce of Newcastle

    What the stimulus did was enrich the rich. The bond buying let the rich investors sell to the Fed, then they all piled into other assets like the NYSE. Now they are selling out of it as the punters are attracted to the rising sharemarket.

    What the US government didn’t do is encourage the real employer of people – SME’s. Instead they layered on red tape and green tape until no one in their right mind would risk starting a business. So those bright people either drew a paycheck or retired. And they displaced the less competent to the dole queues, because companies will always employ the best first.

    The problem is the stimulus gave an excuse to the pollies not to do the hard stuff. They didn’t have the balls to stand up to the green-left who ladled this bureaucratic crap all over the wealth producers.

    That is the worst thing about the stimulus – it put out the fire normally lit under pollies when a depression occurs. They could say – ‘look, look we’re spending all this money’ while not actually fixing the problem.

  4. Gibbo

    I’d love to see the same graph in Australian terms.

  5. ChrisPer

    I would love to see the same graph including labour force participation.

  6. Makka

    Labour force Participation Rate has collapsed during a period of significant population growth.

    47 million Americans receive food stamps.

    I don’t believe any official US stats. They are so full of sh*t as to be entirely useless.

  7. motherhubbard'sdog

    The correct answer to the question is “I don’t know”.

  8. Andrew

    I don’t think the passing of the stimulus bill actually CAUSED the massive initial blowout. The most generous interpretation for the Kenyan is
    – the initial GFC effect after the Lehman collapse had a much greater impact on employment than they had forecast (and let’s face it, the same Treasury dunces who said “Sure, let’s make an example of Lehman – what’s the worst that can happen?” were not about to forecast 10%+ unemployment within weeks)
    – once the stimulus kicked in, it had no effect whatsoever on the trajectory of recovery – jobs recovered exactly like they always had post recession
    – the unwinding of the stimulus since 2012 had zero or de minimis effect on the rate of recovery as the TEA Party’s policy “victory” can’t be see on the chart, so it probably didn’t do any huge damage when it was in place either.

    So best case, they spent about $2tr of additional accumulated deficits achieving the same result as if they had done nothing but sit there with their thumb up their ass for 4 years.

  9. Johno

    Keynesian marco-forecasting makes the Left’s IPCC modelling look credible.

  10. Tel

    That graph is almost exactly perfectly wrong. I mean if tit were arse the whole thing would make perfect sense.

  11. Tel

    Mum always said if you tell yourself a lie is true often enough, you will eventually believe it.

    Sometimes the difference between a con artist and a sincere man is that the latter has started to believe what he says.

  12. Clam Chowdah

    I sent this link to an American friend who noted the numbers for the unemployed are dodgy as they don’t take in to account all of those that have taken early retirement because there was not enough work, or the people that ran out of unemployment insurance who are totally off the charts.

  13. Bruce of Newcastle

    The one about Keynesian Economics 101 is a hoot:

    Mid-Week in Pictures: Milton Friedman’s Birthday

  14. egg_

    Keynesian marco-forecasting makes the Left’s IPCC modelling look credible.

    Was thinking the same – garbage in – garbage out.

  15. sdfc

    Yes, because deflation is so much better obviously.

  16. Alan Austin

    The 36 out of 37 economists who believe the stimulus was effective would appear to be doing so on the basis of empirical evidence.
    Is it possible for those who disagree with the 36 to show where their evidence is faulty, or point to other evidence which they may have overlooked?
    This would be more helpful than assertions they are lying.

  17. Normal Norman

    Sinc: you are having a bad day. This graph is not evidence. And you are trying to win a 36:1 debate!

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