The study by Alan Blinder and Mark Zandi accidentally shows the $700 billion TARP bank bailout was effective and might have cost us nothing had it not been altered and expanded later. The study claims there were benefits from the “stimulus,” but demonstrates none.
Any argument that the $800 billion “stimulus” program worked is undermined by Obama’s own Council of Economic Advisors, which predicted on Jan. 10, 2009, that the “stimulus” would hold the unemployment rate at 8 percent or lower. Without the “stimulus,” the Council said then, the jobless rate would reach 9 percent.
Failed ‘stimulus.’ With the “stimulus,” the unemployment rate did not peak at 8 percent. It went to 10.1 percent last October, even higher than Obama’s economists said it would go had there been no “stimulus” at all.
So it’s silly to declare now that the “stimulus” worked when the jobless rate is stuck at 9.5 percent -- 1.6 percentage points higher than the unemployment rate of February 2009.
As for the TARP bank bailout money, the Blinder and Zandi study has some good news. All of the money lent to the banks may be paid back.
Spend, spend. Oh, but there is bad news, too. Because the Democrats were aware we might lose that bank bailout money, the Democrats have decided that we will lose it.
Rather than taking the repaid money and repaying China for the loan, the administration quietly has been reallocating recovered TARP money to projects and programs that are almost guaranteed never to pay off.
The result: In addition to flushing the “stimulus” money down the drain, the good bets are being turned into bad.
Frank Warner
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Update: Innocent Bystanders reaches a similar conclusion, with helpful numbers:
That’s right. According to Blinder & Zandi, we’ve spent $391 billion in stimulus money in “now” dollars, to get a GDP increase of $340 billion (in 2005 dollars), so we lost $51 billion. Lost $51 billion. If you adjust for inflation, it only cost us about $10 billion, but the point is that rather than spending the money in a way that has a big economic multiplier, it’s been spent with a economic multiplier less than 1.They also tell us that their modeling predicts that the stimulus itself was responsible for 2.5 million jobs. If you simply take that at face value, and divide it into the $391 billion spent thus far, you find that each job cost us more than $150K. Yep – each job over that 18 month period cost us $100K/yr.
My thoughts are, that whatever mess Obama inherited, he's now made them at least three times worse. He has not put the monies to proper true stimulus use and his economic policies have done very little to nothing to calm the nerves of the private business sector. They just won't hire with all the uncertainty that his administration has fostered with no relief in sight.
But, of course, Obama and his minions just don't get that.
Posted by: CJW | July 30, 2010 at 02:09 PM
The majority of well known and respected economists have said that if the Federal Gov't hadnt intervened, the economy would have fallen into a depression. Now, please tell me what Obama did to make it worse?
He inherited a disaster. Republicans don't think tax cuts are spending! Of course it is! If you don't pay for it, it adds to our debt. Why do you think we're deeper in debt than we were when Clinton left office and Bush came in?! Not to mention the millions of dollars we spend a day in the two wars we're in.
So tell me, how has Obama made it worse? What would you have done differently?
Posted by: Jon Beristain | July 31, 2010 at 02:27 AM
A majority of well known and respected economists have said, if the federal government hadn’t intervened, the economy would have fallen into a Depression?
First, who says the economy hasn’t fallen into a Depression? We have a Depression-era unemployment rate, and all this after the White House Council of Economic Advisors said the “stimulus” would keep the jobless rate at 8 percent or lower.
Who are these well known and respected economists who say the combination of $700 billion in TARP backing and $800 billion in “stimulus” kept us from something much worse? Name 50 such economists – half left-leaning and have right-leaning – and then name the 26 who say that without both TARP and the “stimulus” things would be much worse.
The president’s Council of Economic Advisors last year did say things would be “worse” without the “stimulus.” They said unemployment would reach 9 percent without the “stimulus.” But then, with the “stimulus,” unemployment reached 10.1 percent. So maybe those “well known and respected economists” are disqualified by reason of having been totally wrong already.
CNN reports that lesser known economists from the real world don’t think the “stimulus” helped at all.
It is beginning to appear that TARP was necessary, if only to quell the panic. It also appears that the TARP money the government put up to back the banks will be repaid. So in addition to inspiring confidence, there is no loss as far as the banks go. (But careful now. Watch how TARP is being redefined as an excuse to toss away money to interest groups who won’t pay it back.)
As far as the difference between government spending and tax cuts, President Kennedy understood it well, and so does well known and respected Harvard economist Robert Barro. Government spending, particularly when it is aimed at failing big businesses, bloated interest groups and inefficient ideas, has zero stimulative power. Tax cuts, on the other hand, are stimulative because they allow 300 million Americans to make the most economical decisions rooted in the real world. Because they let 300 million people act out the laws of economics, tax cuts point money in the directions most likely to increase innovation, productivity and jobs.
Because the $800 billion “stimulus” was two-thirds top-down spending, often encouraging unsustainable activity, it was a waste of an idea that still hasn’t produced one real-world job.
Our little debate here so far has left out the ill-timed $1 trillion (over 10 years) health care legislation, which added far too high a cost and far too much economic uncertainty in a time of financial stress. The nation is trillions in debt, so let’s add another $1 trillion to the burden? Which majority of well known, respected economists thought that was a good idea?
And which majority of well know, respected economists thought it was a good idea to exempt mortgage giants Fannie Mae and Freddie Mac from financial reform? Do we want yet another $1 trillion in bad home loans?
TARP, as first described, probably helped stabilize things. All this other stuff seems to have drilled holes in a boat already taking on troubled water.
Posted by: Frank Warner | July 31, 2010 at 05:33 AM
Clinton stripped the intelligence services and military to the bones which led to 9-11. But, Clinton and tools like you get to throw out that budget surplus BS. If he had spent that amount on more intelligence instead of stripoping it down, there are 3000 American lives that could have been saved. That budget surplus was blood money for a dumbass lying adulterer presidenct who took a peace dividend that wasn't earned.
Now your current president has done nothing but spend on all of the wrong things as he pays back his supporters, minorities, unions, and increases the federal government, overhead to the US economy, way beyond anything ever seen in our lifetimes.
Posted by: CJW | July 31, 2010 at 09:38 PM
CJW, it is evident you are drunk with Republican rhetoric and talking points which deem you incapable of your own thoughts. This is what I hear on Fox News. Think for yourself, do some research. Fox News has brainwashed you well!
Tools like me huh? lol Which part of the Clinton presidency didn't you like? The peace or the prosperity? Which one?
When Clinton took office he was serving at a time when the Intelligence community's role ie. the CIA, was up for debate. With the end of the Cold War military and Intelligence spending had begun to decrease. In fact, it was your beloved Republicans Reagan in his 2nd term, and then Bush I who started the decrease in military and intelligence spending. The Cold War was over and many lawmakers in Congress thought, "Why are we spending so much money on it?!"
However, Clinton did continue the trend started by Reagan in his 2nd term, in decreasing spending BUT despite overall cuts he doubled spending on counter terrorism intelligence across 40 departments and agencies. In fact, several right wingers said Clinton was wasting his time and was obsessed with Bin Laden. Clinton tried to get him several times but he failed. And he admits this.
Budget surplus BS? Honestly, I really don't know where you're going with that. It's a fact! It was blood money? That's just stupid! He took a peace dividend that wasn't earned? What do you mean by that? I really want to know what you think the peace dividend was and who bragged about it.
In regards to Obama, give me specifics. What has he spent money on that you disagree with? Were you in favor of Bush's bank bailout? Obama is paying back his supporters?? Man, where do you right wingers get your info?? It's laughable!!
Oh by the way, I'm a registered Independent and for you to believe its only the Dems that spend money is grossly naive and ignorant on your part. How about this fact, when Reagan entered office in 1980, US was the world's largest creditor. By the time he left office in 1989, the US was the worlds largest debtor. Republicans spend just as much, if not more then their Dem counterparts. So wake up!
Posted by: Jon Beristain | August 01, 2010 at 04:56 AM
According to Blinder & Zandi, we’ve spent $391 billion in stimulus money in “now” dollars, to get a GDP increase of $340 billion (in 2005 dollars), so we lost $51 billion. That's a multiplier of 0.87 The Pentagon does a better job of spending money
Posted by: Neo | August 06, 2010 at 10:10 AM
Obama has made the economy at least three times as bad as it was when he inherited and he and his minions don't have a clue how deep the hole is they've been digging. Wake up!
Posted by: CJW | August 06, 2010 at 04:05 PM