When Barack Obama was originally pushing his ginormous stimulus bill, like many conservatives, I pointed out that it wasn’t going to work.
Among other things, I noted history has shown that stimulus bills of this sort don’t get the economy moving, I pointed out that there wasn’t even that much Keynesian stimulus in the bill — and it didn’t escape my notice that a significant portion of the spending was backloaded. In other words, we were going to spend as much money as “FDR’s New Deal AND the war in Vietnam combined” for a stimulus bill that wouldn’t actually stimulate the economy.
That was my position. Now for reasons that will soon become obvious, let’s look at some of the things that Robert Reich, Clinton’s Secretary of Labor, was saying about the same time. Of course, he supported it.
As the buyer of last resort, the federal government must respond if that cycle is to be reversed. In my judgment, this will require a stimulus of about 6 and a half percent of gross domestic product, or a total of some $900 billion, spread over two years. That’s my estimate for the shortfall in private demand. But the federal government should stand ready to spend larger sums if necessary to get the economy back on track toward full capacity. The danger is not that the government will do too much; the danger is that it will do too little, too late. Without such action, I estimate that another 3 million jobs will be lost in 2009, unemployment will rise to 10 percent of the workforce by the end of this year, and under-employment – including people working part-time who would rather be working full time, and those too discouraged even to look for work – will reach 15 percent. Without federal action, next year could be even worse.
As we now know, the unemployment rate hit 10.2% and underemployment was still at 19.1% in May of this year. In other words, things turned out even more poorly than Reich’s “worst case scenario” predicted it would get WITHOUT the stimulus.