The stimulus bill, three years later

We’d be remiss in not mentioning that today is the three-year anniversary of the 2009 American Recovery and Reinvestment Act. So what do we know about the stimulus, three years later?

Well, we know that the economy is still lousy, with millions of Americans out of work. But it’s hard to know what the counterfactual is. The University of Chicago’s Booth business school recently surveyed the nation’s top economists, and the vast majority agreed that the economy would be in worse shape today without the stimulus. How much worse? One possible clue comes in this graph from today’s Economic Report of the President, showing that the recent U.S. recession was far less severe than the average downturn associated with past financial crises:

(Council of Economic Advisers)

More precisely, you can read the Council of Economic Advisers’ most recent assessment of the stimulus here (pdf), in which they note that, as of mid-2011, there would’ve been between 2.2 million and 4.2 million fewer Americans employed if the bill had never passed. (They round up a number of studies from places like the CBO, Moody’s, Goldman Sachs and so forth.)

Or, if you’d rather not take the White House’s word for it, check out Dylan Matthew’s comprehensive round-up of nine economic studies of the stimulus bill. Of those, six found a significant positive effect on growth and unemployment, while three found either a small or hard-to-predict effect.

Meanwhile, it’s worth noting that the $787 billion bill passed by Congress in February 2009 was hardly the last word on stimulus. As Ezra argued recently, when you include subsequent income tax cuts (like the big 2010 deal to extend the Bush tax cuts), plus payroll tax cuts, plus first-time homebuyer’s tax credits, plus unemployment expansions, then Congress has actually spent more than $1 trillion trying to boost the economy. Plus there was the $150 billion payroll tax deal passed by the Senate today.

So that’s about $1.15 trillion worth of stimulus since 2009. But to put that in context, the Congressional Budget Office estimates that the “output gap” (the difference between what the economy’s capable of producing and what it’s actually producing) has been about $4 trillion over that time frame. The financial crisis and downturn punched a sizeable hole in the economy. And only about a fourth of it has been filled by stimulus.