02/22/2012

Economists Agree That Recovery Act Was a Success

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It's hard to get 80 percent of economists to agree on anything. Yet, that many answered yes when asked in a recent poll if the 2009 stimulus—the American Recovery and Reinvestment Act—helped increase employment. Only 4 percent disagreed.

These results coincide with the act's third anniversary (Feb. 17), and run counter to comments widely—and wrongly, as it turns out—expressed by opponents of the Obama administration. On the question of whether the long-term benefits of the stimulus would outweigh the long-term costs, 46 percent agreed and only 12 percent disagreed. (A large number were uncertain.)

Even as the economy recovers, we still have a long way to go toward reducing the number of people who are unemployed or underemployed. But it's worth remembering how dire the situation was at the end of 2008; it seemed likely that the economy was heading toward a depression unless dramatic action was taken.

As Vice President Joe Biden wrote in a Tampa Bay Times column marking the third anniversary, "The Recovery Act did what we asked of it. Three million jobs were created or saved. Essential investments in keeping teachers on the job, building a domestic clean energy industry, and repairing our roads and bridges have helped to foster the economic growth that we are now starting to see."

Josh Bivens of the Economic Policy Institute uses this analogy in looking at the stimulus's impact on jobs: "The unemployment rate without the Recovery Act would have reached nearly 12 percent, not the 9 percent foreseen by the Obama administration. A good metaphor for this controversy is the temperature in a log cabin on a cold winter's night. Say that the weather forecast is for the temperature to reach 30 degrees Fahrenheit. To stay warm, you decide to burn three logs in the fireplace. You do the math (and chemistry) and calculate that burning these three logs will generate enough heat to bring the inside of the cabin to 50 degrees, or 20 degrees warmer than the ambient temperature.

"But the forecast is wrong—and instead temperatures plummet to 10 degrees outside and burning the logs only results in a cabin temperature of 30 degrees. Has log burning failed as a strategy to generate heat? Of course not. Has your estimate of the effectiveness of log burning been wildly wrong? Nope—it was exactly right—it added 20 degrees to the ambient temperature. The only lesson from this one is a simple one: since the weather turned out worse than expected, you need more logs."

A video from the Center for American Progress explains the positive impact in a more straightforward way.

President Obama's fiscal year 2013 budget proposal includes a number of initiatives designed to build on the success of the stimulus and continue the economic recovery. [Dan Gursky, Economic Policy Institute]

February 22, 2012