New Consensus Sees Stimulus Package as Worthy Step
source: http://www.nytimes.com/2009/11/21/business/economy/21stimulus.html?_r=1&hp
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WASHINGTON — Now that unemployment has topped 10 percent, some liberal-leaning economists see confirmation of their warnings that the $787 billion stimulus package President Obama signed into law last February was way too small. The economy needs a second big infusion, they say.
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“It was worth doing — it’s made a difference,” said Nigel Gault, chief economist at IHS Global Insight, a financial forecasting and analysis group based in Lexington, Mass.
Mr. Gault added: “I don’t think it’s right to look at it by saying, ‘Well, the economy is still doing extremely badly, therefore the stimulus didn’t work.’ I’m afraid the answer is, yes, we did badly but we would have done even worse without the stimulus.”
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While some conservatives remain as skeptical as ever that big increases in government spending give the economy a jolt that is worth the cost, Martin Feldstein, a conservative Harvard economist who served in the Reagan administration, said the problem with the package was that some of its tax cuts and spending programs were of a variety that did little to spur the economy.
“There should have been more direct federal spending that would have added to aggregate demand,” he said. “Temporary tax cuts and one-time transfers to seniors were largely saved and didn’t stimulate spending.”
Even so, “the stimulus is doing what it was supposed to do — it is contributing to ending the recession,” he added, citing the economy’s third-quarter expansion by a 3.5 percent seasonally adjusted annual rate. “In my view, without the stimulus, G.D.P. would still be negative and unemployment would be firmly over 11 percent. And there are a little over 1.1 million more jobs out there as of October than would have been out there without the stimulus.”
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Among Democrats in the White House and Congress, “there was a considerable amount of hand-wringing that it was too small, and I sympathized with that argument,” said Mark Zandi, chief economist of Moody’s Economy.com and an occasional adviser to lawmakers.
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“It was worth doing — it’s made a difference,” said Nigel Gault, chief economist at IHS Global Insight, a financial forecasting and analysis group based in Lexington, Mass.
Mr. Gault added: “I don’t think it’s right to look at it by saying, ‘Well, the economy is still doing extremely badly, therefore the stimulus didn’t work.’ I’m afraid the answer is, yes, we did badly but we would have done even worse without the stimulus.”
(...)
While some conservatives remain as skeptical as ever that big increases in government spending give the economy a jolt that is worth the cost, Martin Feldstein, a conservative Harvard economist who served in the Reagan administration, said the problem with the package was that some of its tax cuts and spending programs were of a variety that did little to spur the economy.
“There should have been more direct federal spending that would have added to aggregate demand,” he said. “Temporary tax cuts and one-time transfers to seniors were largely saved and didn’t stimulate spending.”
Even so, “the stimulus is doing what it was supposed to do — it is contributing to ending the recession,” he added, citing the economy’s third-quarter expansion by a 3.5 percent seasonally adjusted annual rate. “In my view, without the stimulus, G.D.P. would still be negative and unemployment would be firmly over 11 percent. And there are a little over 1.1 million more jobs out there as of October than would have been out there without the stimulus.”
(...)
Among Democrats in the White House and Congress, “there was a considerable amount of hand-wringing that it was too small, and I sympathized with that argument,” said Mark Zandi, chief economist of Moody’s Economy.com and an occasional adviser to lawmakers.
More...
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