Kachi wrote:
Quote:
This glosses over the fact that a significant source of the spending was the Recovery Act which has been widely considered to have stopped a much deeper economic downturn.
Exactly. Come and get me when you have figures for spending sans Recovery Act and we can talk. Preferably from another source; don't trust your fuzzy maths.
And that's ignoring that even the drops mentioned in those articles (typically about 1-2% GDP), would not account for as much debt as it cost us to pay for the stimulus bill. It's almost certain that we'd have less debt today if we'd not spent that money. Even with the worst estimates of GDP losses (2%?) the lost revenue from that reduced GDP would not have come close to the amount we spent on the stimulus bill. How that would affect the economy as a whole is hard to estimate, of course. The net effect of GDP is not just government revenue. It's also people's ability to pay their rent, put food on their tables, and other kind of important stuff.
I think when people assess that "it could have been much worse!", they're just doing some subtraction and drawing conclusions based on that. But I think they ignore the positive effect that *not* having such huge government spending creates. One of the big criticisms in 2009, 2010, and still today is that many businesses had plenty of funds with which to expand business and hire more people. This factor is, in fact, largely blamed for the current unemployment rate, from which all those negative effects I spoke about earlier derive. But the reason employers haven't been hiring is because of the uncertainty in the market. And that uncertainty hasn't been because of the stability of the market itself since TARP was passed. It's been almost entirely about not knowing what the Democrats were going to do next.
While we can mathematically look at the dollars spent by the stimulus bill (and others), and talk about the direct effect they had, it's important to note the indirect effect they had as well. By doing that, they created a "anything could happen next" atmosphere in the market. What business is going to spend money expanding its operation if it's not sure what taxes might go up next year, or whether the government will create or remove some subsidy, or whether the government will provide some new incentive or penalty for various economic actions? The indirect effect of those government actions were to freeze business in its tracks. They're waiting for the government to stop moving the spaces around on the game board so they can plan their next move.
And IMO, that's had a far far more negative effect than any positives during that time. Had the stimulus been half the size and more directly targeted, maybe not. Had the bills the Dems passed in general been more aimed at immediate need and less at longer term policy setting, maybe not as well. But the sheer amount of money, and the broad scope of the things spent on effectively prevented recovery from happening. Hopefully, now that the GOP has some say in things, business wont be as afraid about what's going to happen next, and we'll start seeing them spend money and hire people. That's how we recover from this. No amount of spending by the government will do it.