The constant backwards-looking nature of our political debate means we don’t put as much of a focus on that which could move us forward, regardless of the slip-ups in the past. But from a historical point of view, it’s important to properly assess the past so we learn something from it. In that spirit, I highly recommend Christina Romer’s honest take on the stimulus.
In an election year, we’ve often gotten this binary description of the stimulus, it either being the transformative policy of an era or a wasteful nothingburger. In reality, you can incorporate both of these takes into a nuanced view, where the stimulus is valuable in saving and creating jobs, but also inadequate as a full program for recovery. Romer, despite her past position as the head of the Council of Economic Advisers, delivers this viewpoint.
She starts with a conventional look at how many jobs the Recovery Act created, as well as the knock-on effects.
Two careful studies have looked at the relationship between this formulaic spending and employment. Both find that states that received more money fared substantially better. This is the strongest direct evidence that the Recovery Act contributed to employment growth. Based on the estimated size of the effect, the studies suggest that the act created more than three million jobs […]
In addition to its near-term jobs effects, the Recovery Act may also be having more lasting benefits. It’s too early to measure the value of the roads, bridges and airports improved through stimulus funds. But a survey of influential studies looking at highway construction in the 1950s and ’60s suggests that such investments contribute substantially to long-term growth.
Likewise, the Recovery Act’s funding of basic research and clean-energy technology is only just beginning to pay dividends. And, contrary to some claims, the Government Accountability Office has found that those investments were accompanied by almost no fraud and abuse.
But she’s enough of an empiricist to explain that this wasn’t enough to dig the economy out of its hole.