Measuring the success of the stimulus package
Two Princeton economists used economic modeling programs to see the effect of the federal stimulus package on the economy.
Floating cash (Kativ / iStockPhoto)
More on America's Financial Crisis
TEXT OF STORY
Kai Ryssdal: So durable goods and inventories are two measures of the economy. Economists Alan Blinder from Princeton and Mark Zandi, chief economist at Moody's Analytics have come up with another one. They took to their computers, ran economic modeling programs and tried to show just how effective the stimulus package has been.
Princeton's Alan Blinder:
Alan Blinder: The model says that it would have been terrible without it that we would have had something that realistically would have been called a depression.
For instance, says Zandi, the jobs situation would have looked a whole lot bleaker than it does even now.
Mark Zandi: We lost about eight and a half million jobs from the peak to the trough, if we had not had the extraordinary policy efforts, our estimates is that our job losses from peak to trough would be just about double that -- 16 to 17 million.
Score one for the stimpack, right? Not so fast. We may be headed out of a recession but we are running head-long into the worst budget deficits we've ever seen. So despite the jobs and the dodging of a Depression, the White House is still on the defensive. Here's budget director Peter Orszag in a speech this morning.
Peter Orszag: I think there has unfortunately developed a false debate between jobs and the deficit. It would be foolish to dramatically reduce the deficit immediately, because that would choke off the economic recovery before it has had a chance to develop adequately.
That, however, is a fight Peter Orszag won't have to have. His last day on the job is Friday.
Comments
Comment | Refresh
From Stow, MA, 07/28/2010
Your title and story missed key result of the modeling by saying it was the stimulus that gave the improvement. In fact it was the other interventions that saved the economy from the worst case. The stimulus actually was the least effective. As quoted from the NY Times acticle:
"In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration’s fiscal stimulus program, the nation’s gross domestic product would be about 6.5 percent lower this year".
"For one thing, Mr. Blinder and Mr. Zandi find that the financial stabilization measures — the Troubled Asset Relief Program, as the bailout is known, along with the bank stress tests and the Fed’s actions — have had a relatively greater impact than the stimulus program".
"If the fiscal stimulus alone had been enacted, and not the financial measures, they concluded, real G.D.P. would have fallen 5 percent last year, with 12 million jobs lost. But if only the financial measures had been enacted, and not the stimulus, real G.D.P. would have fallen nearly 4 percent, with 10 million jobs lost".
I admit that I have not read the actual paper, but am assuming that the NY Times article did a little better job in understanding the results than your report's segment. Was your report trying to lobby for more stimulus? Maybe next time you can do more to research the topic for your report.
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.