LESS IS MORE

In the Progressive worldview even when you lose money it can be counted as a gain if enough smoke and mirrors are used. When the Stimulus spends more cash than the activities it promotes produce a normal person would say “ What a dumb idea “ but apologists for the Obama administration laud the outcome as a great progressive accomplishment. Obama apologists Prof. Blinder and Prof. Zandi put the Obama spin on bad news.

You see, Alan Blinder (Princeton Univ.) and Mark Zandi (Moody’s Economy), recently released a report titled “How US Policy Ended the Great Recession.” While a few articles have criticized the report, by and large the media reporting has looked like Ezra Klein’s “Zandi: Financial rescue and stimulus responsible for saving or creating 8.5 million jobs” article. Lots of cheerleading and high fives over the success of the stimulus and the immense wisdom of the Obama administration.
That’s a nice spin, but if you read the report, does it truly say that the “financial rescue and stimulus” were responsible for “saving or creating 8.5 million jobs?” Not really. The report actually places most of the credit on the changes in financial policy & TARP.
And in fact, though the authors wax enthusiastically over the ARRA stimulus, the calculations in the report show that the stimulus package was hugely inefficient and wasteful. I backed out some numbers from the report – numbers that Blinder & Zandi didn’t see fit to present. I’m using their numbers to compare the situation as it is (“Stimulus+Policy”) with the prediction for financial reform+TARP but no stimulus (“Just Policy”) Take a look at what I found:

Stimulus+Policy Just Policy

GDP (1Q09 – 2Q10)
$19,558 Billion $19,218 Billion

GDP Boost From Stimulus
$340 Billion
ARRA Stimulus Spent
(1Q09 – 2Q10)
$391 Billion

That’s right. According to Blinder & Zandi, we’ve spent $391 billion in stimulus money in “now” dollars, to get a GDP increase of $340 billion (in 2005 dollars), so we lost $51 billion. Lost $51 billion. If you adjust for inflation, it only cost us about $10 billion, but the point is that rather than spending the money in a way that has a big economic multiplier, it’s been spent with a economic multiplier less than 1.
They also tell us that their modeling predicts that the stimulus itself was responsible for 2.5 million jobs. If you simply take that at face value, and divide it into the $391 billion spent thus far, you find that each job cost us more than $150K. Yep – each job over that 18 month period cost us $100K/yr.
Reality has little chance against Progressive spin.