"Wall Street Journal Won’t Put Down The Shovel On Stimulus Misinformation"
Our guest blogger is Michael Ettlinger, Vice President for Economic Policy at the Center for American Progress Action Fund.
The Wall Street Journal editorial page isn’t often right (or, perhaps I should say “correct”), but it’s really gone a round too far in challenging Jared Bernstein, Chief Economist to the VP and Executive Director of the Middle Class Task Force, on whether the American Recovery and Reinvestment Act (i.e the stimulus package) is working.
To start off, I should say that I’ve known Jared for quite a while, worked with him for six years and have great respect for him. You could, I suppose, call me biased. But the truth is simply that I know him well enough, and have even disagreed with him enough, to know that his numbers are always right.
Jared took on the Journal’s editorial page by citing some straightforward analysis from the Council of Economic Advisors and the Congressional Budget Office — which found that ARRA has saved or created 600,000 to 1.6 million jobs — as well as reporting from the Journal’s still-credible news pages:
[The Editorial Board's numbers] don’t square at all, of course, because the editorial board is more interested in scoring political points by discrediting the Recovery Act’s jobs impact than they are in reading their own paper’s reporting. And let’s be clear: while the new CBO findings are a welcome addition, these facts have been out there for months, including from an earlier CBO report last March.
The Journal then, made the mistake of responding in a way that actually proves Jared’s point. First, it dragged up a projection Jared made about what the unemployment rate would be if ARRA were enacted and which proved overly optimistic. That projection was consistent with what other economists were saying at the time — but more importantly, if we used missed projections of economic outcomes to disqualify economists we wouldn’t have any qualified economists. The analysis of the impact of the recovery bill isn’t about projections, it’s about evidence and facts.
The Journal’s next argument is that an earlier analysis of the impact of the Recovery Act by Jared is “now-infamous,” and characterizes CBO’s straightforward description of its methodology as an admission. Hardly a sophisticated critique. Both Jared’s and CBO’s analyses are pretty standard. The Journal seems to have a problem with accounting for the fact that, when someone gets a job, the benefit to the economy isn’t just to the person hired, but also to the nearby store, now that the hired person has a job and can spend some money.
The next round of Journal critique might, in other times, have some basis. The point they make is that the money the recovery act spends has to come from somewhere, and wherever it’s coming from is costing jobs. But they miss what’s actually going on in the economy.
The government has borrowed this money. That’s not sustainable for the long-run, but it’s exactly the right thing to do now. The money that’s borrowed has been money on the sidelines domestically, or money from other countries seeking safe harbor — not money that otherwise would be put into great investments in the private sector.
The private sector has been flat on its back with little interest in investing. The Federal Reserve has been pumping massive amounts into the economy — much more than was in the Recovery Act — to create liquidity as fast as it can. The fact that the Treasury has been able to borrow at such low interest rates proves the point — there aren’t investments out there that Treasury is having to compete with by offering a very good return.
The Journal’s last swing is it’s most embarrassing. It says that because unemployment is high, ARRA must be a “manifest bust.” If the growth rate for the economy is 2.8 percent, instead of a 0.4 percent contraction, and we have 1.6 million more jobs than we would have had otherwise, then the recovery act isn’t a failure. And the basically straightforward analyses of those who have looked at this seriously show that kind of impact. Only an editorial that is “more interested in scoring political points” would be so disingenous.