THE SUCCESS OF THE STIMULUS…. When the second quarter GDP numbers were released this morning, the data showed the economy faring slightly better after six months of deep and painful contraction. It wasn’t consumer spending that led to progress, however, but rather government spending that “helped economic activity in the spring.”
Now, that in and of itself, is probably uncomfortable news for conservative Republicans, who’ve spent the better part of the year, if not the better part of their adult lives, arguing that government spending is incapable of helping economic activity. Indeed, let’s recall that earlier this year, at the height of the economic crisis, the congressional GOP insisted that a five-year spending freeze was the responsible course of action.
But more to the point, these conservatives failed, and Democrats passed a stimulus package. The Economic Policy Institute’s Josh Bivens reviews the numbers from the second quarter and concludes that the recovery efforts made a real difference. (via Kevin Drum)
The marked improvement in this quarter relative to last is largely due to the American Recovery and Reinvestment Act (ARRA)…. Despite the overall contraction, the fingerprints of the American Recovery and Reinvestment Act could be seen in some aspect of today’s report. Federal government spending grew at an 11% rate in the quarter, adding roughly 0.8% to overall GDP. State and local government spending grew at a 2.4% annual rate, the fastest growth since the middle of 2007. It is clear that the large amount of state aid contained in the ARRA made this growth possible.
Furthermore, real (inflation-adjusted) disposable personal income rose by 3.2% in the quarter, after rising by only 1% in the previous quarter. A large contribution to this increase was made by the Making Work Pay tax credit passed in conjunction with the ARRA, as this was the first full quarter that the credit was in effect. […]
The consensus of macroeconomic forecasters is that ARRA contributed roughly 3% to annualized growth rates in the second quarter. This means that absent its effects, economic performance would have resembled that of the previous three quarters.
Kevin added, “The argument that the stimulus bill has ‘failed’ because times are still tough has always been dimwitted. There was never any chance that it was going to miraculously end the recession, only that it might make it a little shallower than it otherwise would have been. So far, it appears to have done exactly that.”
In recent months, the Republicans have worked hard to convince the country that the recovery efforts were not only misguided, but can already be deemed a “failure.” That said, slowly but surely, we’re not only seeing improvements in the economy, we’re even seeing far-right Republicans concluding that the stimulus may not have been so bad after all.
For about a quarter-century now, conservative Republicans have been wrong about every major economic turning point. They said Reagan’s tax increases would hurt economic growth, but they didn’t. They said Clinton’s tax increases would produce devastating recessions, but they didn’t. They said Bush’s tax cuts would generate vast wealth and balanced budgets, but they didn’t. And they said Obama’s recovery plan would be (and has been) a disaster, and that’s proving to be wrong, too.
I’m beginning to think these guys should just stop making economic arguments. They’re always wrong.