My Twitter feed last night was full of praise for Chris Wallace, the Fox News anchor who moderated the third and final presidential debate. But in the eyes of some economists, Wallace broke with his reputation as a fair and tough moderator with his questions about the economy.
The most cringe-worthy may have been his comments about America's recovery from the financial crisis. Wallace asked a question where he seemed to imply that President Obama’s stimulus package, passed in response to the crippling effects of the recession, actually caused years of slow growth.
“Secretary Clinton, I want to pursue your plan, because in many ways it is similar to the Obama stimulus plan in 2009, which has led to the slowest GDP growth since 1949,” Wallace said.
Online, the question outraged some economists and journalists. Some accused Wallace of deliberately framing the question in a biased way.
To be fair to Wallace, when he said that the stimulus package "led" to slow GDP growth, it's possible he merely meant that the stimulus package was followed by slow GDP growth.
Even so, however, the concept behind the question is flawed. It's not enough to say that growth was slow after the stimulus. You have to compare what growth was after the stimulus with what it might have been without the stimulus.
Obviously, we can't actually rewind the clock to test out that other reality. But economists have developed statistical tools to examine the impact of economic policies like the 2009 stimulus that basically let them do just that. Numerous economic studies have used geographical variations in how the stimulus money was spent around the United States as a natural experiment to show what its effects have really been.
In a 2012 survey by the Brookings Institution, for example, economists found that states that expanded spending following the recession, often with the help of federal money, experienced smaller increases in their unemployment rates.
Another 2012 study by the Federal Reserve Bank of San Francisco examined differences in regional spending across the United States to quantify the exact number of jobs federal spending produced. That study concluded that the stimulus spending yielded about eight jobs for every million dollars spent, a cost of $125,000 per job.
These are just a few of the many studies that have found that the stimulus, on net, led to higher economic growth and lower unemployment in the years immediately following the Great Recession.
Indeed, in a 2014 survey of 40 prominent economists by the University of Chicago, there was almost unanimous agreement that the 2009 stimulus package resulted in a lower unemployment rate at the end of 2010 than would have occurred without the stimulus bill.
As Paul Krugman argued in a column last night, Europe’s recovery from the financial crisis has also provided a quasi-natural experiment.
Some European countries have chosen to undertake policies of austerity, slashing government spending and raising taxes to chip away at their debt and regain the confidence of markets. Those economies are generally still struggling under crushing unemployment and debt. Countries that chose to stimulate their economies are a little better off.
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