Sunday show economic experts agree: more stimulus needed


On the September 5 editions of CBS's Face the Nation and ABC's This Week, economic experts noted that the initial stimulus package was too small and that the resultant slow economic recovery demanded further stimulus. Media largely ignored progressive economists' statements during the stimulus debate that the package was too small, and have since promoted the falsehood that the stimulus failed.

Economic experts take to Sunday shows and call for more stimulus

Krugman: "Back in January '09... a number of us said, 'This is not commensurate with the scale of the crisis.'" On This Week, Nobel laureate economist Paul Krugman noted that many economists raised concerns that the stimulus might not be large enough when it was first proposed. Krugman said, "Back in January '09, when Obama was first announcing his plans, a number of us said this is not commensurate with the scale of the crisis." Krugman later added, "What we need is more demand."

Tyson: "We need targeted policies for jobs and right now, the deficit is not the issue." On Face the Nation, former chair of the Council of Economic Advisers Laura Tyson said: "I think we're in a situation where we're bumping along at a slow rate [of economic growth]. There's a lot of down side risk. I think all of us agree here we need targeted policies for jobs and right now, the deficit is not the major issue. The major issue, slow economy, lack of jobs, 24 million people are still looking for full-time work. We really have to get our priorities right and focus on targeted job creation policies."

Morgenson: "The stimulus was not big enough... we need something instant." On Face the Nation, New York Times assistant business and financial editor Gretchen Morgenson, who received the Pulitzer Prize in 2002 for coverage of Wall Street, said: "The stimulus was not big enough. Because you would have seen far greater recovery. The unemployment numbers would be better, I think, if you had, if we wanted to think the stimulus was enough. But again I think that it has to be targeted. I think that what Laura, the point she made earlier is a good one. That is, let's go for things that will have a more immediate impact like, say, a payroll tax cut holiday or a payroll tax holiday. We need something instant, something a little bit quicker."

Zandi: "[A]dditional help" for the recovery "would be prudent." When asked by guest host Harry Smith about the possible need for a second stimulus, Mark Zandi, chief economist for Moody's Analytics and a former economic adviser to John McCain's presidential campaign, answered:

Well, we are talking about other stimulus, right? I mean, an R&D tax credit, payroll tax holiday, job tax credit. All these things are different forms of stimulus. In fact, the federal government has provided a couple hundred billions dollars in additional stimulus beyond the recovery act stimulus that we put in place a year-and-a-half ago. So, we are doing that. In my view the recovery needs some more help. It would be prudent, I think, to provide some additional help through some of the things that we're talking about.

Tyson advocates for increased infrastructure spending. When asked by Smith about the possible need for larger stimulus spending, Tyson said:

I believe that we should look at infrastructure because we know before the recession, before the great recession, we know that we were vastly under-spending on the nation's infrastructure. You can sort of, therefore, start with the notion: infrastructure spending is terrific in two ways. It creates demand right away when you go out and get the project started and get the workers started. It also creates the ability to grow and be productive in the future.

Zandi, Tyson: A payroll tax holiday for new hires would stimulate economy. On Face the Nation, Tyson and Zandi agreed that a payroll tax holiday for firms making new hires, reportedly under consideration by the administration, would have an immediate stimulating economic effect:

SMITH: Mark, let me start with you. Among the two very important ideas that are being talked about this week that the president is suspected to be addressing on Wednesday is this idea of suspending a payroll tax. How much of a boost can that provide? And is it enough to help speed the recovery as the president suggests?

ZANDI: I think if we suspend the payroll tax for businesses that go out and hire additional workers, expand the job tax credit that is in place today, I think that could be effective and be helpful in the next six, 12 months when the recovery really needs it. I think that would be a boost to the economy.

SMITH: Laura Tyson, how do you feel about it?

TYSON: I think that's correct. I think that we already have in place the credit. The credit could be extended into a partial payroll tax holiday. I think the issue is really gonna be for new hires. All new hires. And then what the size of the firm should be. This is an area I which is really worthy of serious discussion and with the possibility of some action.

Media rarely raised economists' warnings that stimulus was too small during debate

A Media Matters review of the ABC, CBS, and NBC evening news programs from January 25, 2009, through February 15, 2009 found that of the 59 broadcasts that addressed the economic stimulus package and debate in Congress during the three-week period leading up to and immediately following its passage, only three of those broadcasts included discussion of whether that package was big enough, despite statements from many economists that it might not be.

While right-wing media claim stimulus failed, analysts agree it significantly boosted GDP, employment

Since its passage, right-wing media have falsely claimed the package failed. Right-wing media figures and outlets frequently promote the false claims that the stimulus "didn't work" and "has not created jobs."

CBO: Unemployment would be as much as 1.8 percentage points higher without the stimulus. A report released in August by the Congressional Budget Office estimated that the stimulus lowered the unemployment rate by between 0.7 and 1.8 percentage points. Thus, had the stimulus not been passed, the unemployment rate could currently be as high as 11.4 percent, compared to the actual rate of 9.6 percent. The CBO estimates that the stimulus increased the number of employed people by between 1.4 million and 3.3 million.

CEA: Recovery act raised GDP by at least 2.7 percent in the second quarter of 2010. In its fourth quarterly report on the American Recovery and Reinvestment Act of 2009, the Council of Economic Advisers (CEA) stated that "the ARRA has raised the level of GDP as of the second quarter of 2010, relative to what it otherwise would have been, by between 2.7 and 3.2 percent."

Independent analysts agree that recovery act significantly raised GDP. In its quarterly report, the CEA included figures from independent analyses that also credited the recovery act with increasing the GDP. Included in these figures is the estimate by the nonpartisan CBO, which estimated that the stimulus raised GDP "by between 1.7 percent and 4.5 percent." CEA included the following chart in its report:

Table 8. Estimates of the Effects of the ARRA on the Level of GDP

CEA: Recovery act has raised employment "by between 2.5 and 3.6 million." In its fourth quarterly report on the ARRA, the CEA stated: "The CEA estimates that as of the second quarter of 2010, the ARRA has raised employment relative to what it otherwise would have been by between 2.5 and 3.6 million. These estimates are broadly consistent with the direct recipient reporting data available for 2010:Q1."

Independent analysts agree that recovery act significantly raised employment. In its quarterly report, the CEA included figures from independent analyses that also credited the recovery act with increasing employment:

Table 9. Estimates of the Effects of the ARRA on the Level of Employment

Economists say stimulus helped economic recovery

WSJ: 70 percent of economists surveyed said stimulus helped. The Wall Street Journal reported on March 12 that 38 of the 54 economists it surveyed "said the American Recovery and Reinvestment Act boosted growth and mitigated job losses, while six said the legislation had a net negative effect."

ABC News: Most on panel of economists "think the economy would be worse" without the stimulus. ABC News reported on February 18 that "most" of the economists on its panel "think the economy would be worse today without the big aid package, which totaled $787 billion and was signed into law by President Obama on Feb. 17, 2009."

NABE: 83 percent say stimulus raised GDP. A February survey of 203 members of the National Association for Business Economics (NABE) found that "[e]ighty-three percent believe that GDP is currently higher than it would have been without the 2009 stimulus package (ARRA)."

USA Today: Surveyed economists said "stimulus package saved jobs." USA Today reported on January 25:

President Obama's stimulus package saved jobs -- but the government still needs to do more to breathe life into the economy, according to USA TODAY's quarterly survey of 50 economists.

Unemployment would have hit 10.8% -- higher than December's 10% rate -- without Obama's $787 billion stimulus program, according to the economists' median estimate. The difference would translate into another 1.2 million lost jobs.

Posted In
Economy, Jobs, Wages, & Unemployment
Paul Krugman
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