Some columnists have been using the 5-year anniversary of the 2009 discretionary fiscal stimulus package to claim that it worked to jump-start the economy. It’s a tough case to make. The very word “stimulus” has become a dirty word because so many Americans view it as a failure.
So the new argument admits that the stimulus failed politically, but chalks that up to a misinformed public that does not understand that it was a success economically. Thus Ed Luce’s piece in the Financial Times is headlined “RIP Obama stimulus: funeral for a policy success,” while John Cassidy adds in the New Yorker that “Obama’s unpopular stimulus won’t be the last,” and Michael Grunwald writes in Time that “Politically, the White House lost the argument over the stimulus long ago, but it’s still nice to see the facts in black and white,” referring to report coming out of the White House arguing that the stimulus worked.
To make this case one has to claim that there is wide agreement among economists (not just current White House economists) that the stimulus worked. Thus Ed Luce writes, “Rarely has the gap between the US public’s perception and that of economists been greater.” But there is simply no such consensus among economists. My research and that of others, shows that there is little direct empirical evidence that it had a significant effect. At best, there is divided opinion among economists about the stimulus. Indeed, there has always been great deal of disagreement among economists on the efficacy of these temporary “Keynesian” stimulus packages. And during the 1980s and 1990s there was a huge amount of skepticism of their usefulness.
How do the new pro-stimulus arguments deal with the fact that there is clear disagreement? Some ignore it and simply assert that there is agreement. Others claim, as does John Cassidy, for example, that the economists on the “it didn’t work” side, such as John Cochran and me, actually favor these stimulus packages. John Cassidy refers and links to a Wall Street Journal article of mine written after the 2008 stimulus but before the 2009 stimulus. But that article was explicitly critical of the Keynesian temporary stimulus package then under consideration and eventually enacted. It explicitly argued against such “temporary, targeted, timely” policy actions proposing instead “permanent, pervasive, predictable” policy. It is no where near favoring the type of package that was enacted in 2009 (or in 2008).