Did the stimulus work?
Certainly not according to Republicans, who regularly blast President Obama’s “failed” economic policies on the campaign trail. GOP presidential candidate Mitt Romney has called the $787 billion package of temporary tax cuts and spending hikes “the largest one-time careless expenditure of government money in American history.”
But on Wednesday, under questioning from skeptical Republicans, the director of the nonpartisan (and widely respected) Congressional Budget Office was emphatic about the value of the 2009 stimulus. And, he said, the vast majority of economists agree.
In a survey conducted by the University of Chicago Booth School of Business, 80 percent of economic experts agreed that, because of the stimulus, the U.S. unemployment rate was lower at the end of 2010 than it would have been otherwise.
“Only 4 percent disagreed or strongly disagreed,” CBO Director Douglas Elmendorf told the House Budget Committee. “That,” he added, “is a distinct minority.”
Elmendorf’s testimony came in response to questions from Rep. Tim Huelskamp (R-Kan.), a member of the tea party caucus. Huelskamp asserted that the stimulus was a failure because it did not keep the jobless rate below 8 percent, as the Obama administration predicted.
“Where did Washington mess up?” Huelskamp demanded. “Because you’re saying most economists think it should’ve worked. It didn’t.”
Most economists not only think it should have worked; they think it did work, Elmendorf replied. CBO’s own analysis found that the package added as many as 3.3 million jobs to the economy during the second quarter of 2010, and may have prevented the nation from lapsing back into recession.
Economists are less unified, however, on the question of whether the short-term benefits of the stimulus were worth the long-term cost. In the same February survey, only 46 percent of economic experts agreed that “the benefits of the stimulus will end up exceeding its costs” — including “the economic costs of raising taxes to pay for the spending.”
Twenty-seven percent of the respondents said they were not certain, while 12 percent said the costs far outweighed the benefits.