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Home Publications Blogs Beat the Press Joe Scarborough's Attack on Stimulus

Joe Scarborough's Attack on Stimulus

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Friday, 01 February 2013 05:50

Most people know that the deficit whiners live largely in a fact free zone, but every now and then it is worth trying to throw a few in their direction in the quest for intelligent life. The immediate motivation is Joe Scarborough's latest tirade after having Paul Krugman as a guest on his show.

Scarborough is of the view that if stimulus was the answer the economy would have already recovered by now. In this context, we might ask what the stimulus was designed to do relative to the size of the problem.

The best evidence here is the assessment of the Congressional Budget Office (CBO) from March of 2009. The reason this analysis is useful is that it is a look at what the economy was expected to do and the impact of stimulus at the time it was passed. CBO was looking at the actual stimulus as passed. It also in an independent agency with no motive to cook the books.

Here's the picture that CBO drew compared to what actually happened.

predicted-impact-stimulus-employment-2013-02

Source: Congressional Budget Office.     

There are two points which should jump out at anyone. First, even as late as March of 2009 CBO hugely underestimated the severity of the downturn. The actual drop in employment from 2008 to 2009 was 5.5 million. The predicted drop was just 3.8 million. In other words, CBO underestimated the initial hit from the downturn by 1.7 million jobs, even after it was already well underway.

If anyone wants to blame the greater severity of the downturn on the stimulus they would have a hard story to tell. Most of the hit was before a dollar of the stimulus was spent. Employment in March of 2009 was 5.4 million before its year ago level.

Of course CBO was overly optimistic about the pace of the turnaround. It predicted that employment would rise by 1.7 million in 2010 even if we did nothing. Someone may have a story about how this increase would have happened had it not been for the stimulus (lower interest rates?), but it is difficult to envision what that story would look like.

The other point that this chart makes nicely is that the predicted gains from the stimulus were small relative to the size of the downturn. CBO predicted that the maximum benefit from the stimulus would be in 2010 when employment would be 2.4 million higher than without the stimulus. This needs to be repeated a few hundred thousand times the stimulus was only projected to create 2.4 million jobs.

That is not rewriting history or making it up as we go along. This is a projection from an independent agency made at the time the stimulus was passed. The economy ended up losing over 7 million jobs. At its peak impact, the stimulus was only projected to replace 2.4 million of these jobs. And after 2010 the stimulus' impact quickly went to zero as the spending and tax cuts came to an end.

How can anyone be surprised that the stimulus did not bring the economy back to full employment? No one expected it to be large enough to reverse the impact of a slump of this magnitude.

President Obama and his team deserve lots of criticism for failing to recognize the severity of the downturn. They deserve even more blame for not acknowledging this fact, and that their stimulus was inadequate for the task at hand.

But their errors do not change the reality. The stimulus was not designed to create 7 million jobs. Why would Joe Scarborough or anyone else be surprised to see that it didn't?

Comments (14)Add Comment
Scarborough Predicts Daytime Temperatures Rise Whether Sun Comes Up or Not
written by Last Mover, February 01, 2013 6:22
Why would Joe Scarborough or anyone else be surprised to see that it didn't?


Because Joe Scarborough's fear of uncertainty and its effect on the economy is so damaging, Scarborough would have you believe not only can he predict the downturn with perfect certainty, he can also predict with perfect certainty that any fiscal stimulus of any size cannot produce a single net new job.
Absolute vs relative
written by David, February 01, 2013 8:52
Methinks it more persuasive to note that 1.7 is nearly 50% of 3.8 (for people who are not fans of arithmetic), which is one heck of an underestimate.
Joe in the Morning
written by Chris, February 01, 2013 9:33
Because Joe knows next to nothing about economics and is just not terribly bright in general. Why MSNBC keeps him I don't know.
...
written by Roger, February 01, 2013 9:44
Chris: Why does MSNBC keep an laughable ignoramus like Scarborough? Because the network corrupt. A better question might be: Why do we keep buying the products advertised on Morning Joe?
deluge not likely to be contained by paper cup
written by watermelonpunch, February 01, 2013 10:40
I'm no expert on economics nor a math whiz, and I could tell, at the time, that the stimulus that was passed seemed rather a pittance compared to the enormity of the situation.

Maybe I'm crackers, but it really seems to be a case of willful ignorance by people completely out of touch with what's been going on.

I'm reminded of a story from many years ago where some people from my area (NE PA), were sued in another part of the country because they were driving along somewhere towing a camper of some type, and somehow completely unaware that something was dragging and throwing off sparks that actually started a serious forest fire.

I see politicians and those who are supposed to inform them, standing around saying, "Well I'm not on fire, what's the problem here?"

At this point, I'm despairingly convinced that the people "in charge" of things will remain willfully ignorant unless & until they start feeling the heat themselves.
Until then, it's just easy to blame the victims.
Joe in the Morning
written by sherparick, February 01, 2013 11:05
You have to remember the competition. Compared with "Fox and Friends" (the highest rated show), Joe's show is an oasis of enlightenment. And for some reason, CNN has gotten the hang of morning show techniques going back to the first "Today" shows. (In some ways they seem to fascinated by CBS's 40 years of failure in morning shows and to repeat them(I believe CBS has been properly cursed by the TV gods for the way it moved around and eventually cancelled "Captain Kangaroo" in the 1970s and early 80s.
...
written by joe, February 01, 2013 12:34
Cuts in public investment and consumption have been a drag on GDP growth for 11 of the last 12 quarters.

Govt employment has fallen by over 600,000 since the start of the recession.

After adjusting for inflation, federal spending in FY 2012 is 200 billion lower than FY 2009.

It's obvious from these simple numbers the stimulus was not nearly big enough.

The Stimulus was as big as it could be
written by jumpinjezebel, February 01, 2013 2:47
In order to get ANYTHING passed by the House and Senate (and some of the Dunces) the SIZE and CONTENT of it had to be severely compromised. that's why it was so small in limited in it's effectiveness. Of course those "Shovel Ready Jobs" BS didn't help any either - but one can only preach so much to the bureaucrats so far down in the organizations to do the right thing.
Sapiential Facts
written by Union Member, February 01, 2013 3:00
A must read for Joe Scarborough:

http://www.nytimes.com/2012/05/13/opinion/sunday/the-human-disaster-of-unemployment.html?_r=2&ref=opinion&
Stimulus Was Too Low and Some Knew It At The Time
written by PJR, February 01, 2013 11:12
Didn't Romer's staff estimate, in early 2009, that we needed a stimulus about twice what Larry Summers recommended as a high-estimate to Obama? And nearly three times what Obama got? As I recall, Summers provided no good economic reason for rejecting Romer's estimate, but he made a political judgment that such a big number would not sell in Congress and chose not to include Romer's findings in his memo to Obama.

In addition, the stimulus was badly skewed to tax cuts rather than job creation, and many economists realized this mistake at the time. Again, the cause was the strong GOP political preference for tax cuts rather than government programs.
...
written by watermelonpunch, February 02, 2013 12:05
@ sherparick I like your theory about Captain Kangaroo! ha ha ha :D

@ jumpinjezebel There's a common belief that there were those who wanted the stimulus to be small enough to be little effective, for political reasons. And the way some are grasping at straws it certainly seems they're disappointed that it was as effective as it was.
...
written by Chris Herbert, February 02, 2013 5:03
The problems was entirely political, in that the GOP was and still is wedded to the 'tax cuts pay for themselves' concept. Throw in the second political GOP decision, that the new President must be made to fail, and you get what we all got: Inadequate stimulus that depended primarily along the tax cut line of thinking and ignored the direct hiring type of fiscal stimulus. The result has been higher unemployment and higher deficits. We could still move forward a lot faster if Congress decided to put people to work in large infrastructure projects, like installing a national smart transmission grid among other badly needed improvements, but the same political GOP calculus remains and thus nothing substantive is done. As for Scarborough, he's a Republican and accepts his party's economic theories without question. That's not going to change. It can only be hoped that voters will finish in 2014 at the ballot box what they began in 2012: A demand their government act on their behalf and help create employment.
How would Don Imus handle Paul Krugman
written by Richard, February 02, 2013 10:41
Joe's predecessor was Don Imus until Don made his unfortunate comments. Imus ran essentially a one person show for many years and was the real thing. He was a good listener. Paul Krugman would have gotten a much better hearing with Don and questions would have been more incisive and helpful. It just would have been a much, much more educational experience. Now I find that the show with its weak host and hostess has devolved, and the management knows this, and therefore have made it a collaboration with many rotating co-hosts/guests that are necessary to keep things going. When Mitka's father several years ago told Joe that he "could not be stunningly superficial" about mid-east events, this remark could have been generalized to everything.
...
written by Fred Brack, February 02, 2013 6:16
I'm a devoted reader, Dr. Baker, and a fan of your straight, blunt approach. But let me pick a bone with regard to this post:

You say, "President Obama and his team deserve lots of criticism for failing to recognize the severity of the downturn."

I ask: If the CBO and the BEA both miscalculated the severity of the recession, how was the Obama Administration supposed to get it right? Moreover, it wasn't until 2011 until the BEA computed the actual decline in the economy and discovered in was more than twice what its original estimate was, right? And that original estimate is what Obama's economic team was working with, right?

Also, while it's fair to say, as you do, that eventually Obama's team should have acknowledged that the stimulus bill was inadequate, how would that have changed anything, other than, to perhaps, frighten consumers and businesses into withholding their spending even more? The fact was, congressional Republicans were never, ever going to vote for more stimulus spending. And many congressional Democrats were not going to, either, since (a) "stimulus" had been turned into a four-letter word meaning bull excrement, (b) virtually all Americans (and Brits, among others) were conflating macroeconomics with household economics (the only framework they knew), and (c) Austrians, austerians, and freshwater economists were mounting an all-out offensive.

It's all hypothetical, I know, but, given congressional Democrats' aversion to the T-word at the beginning of 2009 and the Republicans' tactic of employing the filibuster to accomplish their strategy of denying Obama a second terms . . . given these factors, I know of no plausible story that could be told now that would have altered the history that actually unfolded.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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