People had been taking heart in the fact that for the fast two months the rate of deterioration of the labor market situation had been declining. Well, now it’s speeding up again with 467,000 jobs lost last month. And with a whole slew of states now facing budget crises, I think we’re looking at a midsummer wave of anti-stimulus from those jurisdictions.
Now I think the Obama administration is going to pay a price for not having acknowledged the problems with the stimulus bill they signed in January. A minority of observers thought a stimulus would be a bad idea. A majority of analysts favored stimulus, and the analytic framework they used to support that conclusion suggested a stimulus that was substantially larger than the one enacted by congress. If the administration felt that was the best they could get, then fine—you sign the bill and take what you can get. But they should have clearly and publicly articulated that while the ARRA was a useful step, it would likely prove inadequate to the scale of the problem. Then in the event that it did prove inadequate, they could say they had pointed this out at the time and maybe the Senate should stop ruining everything.
Instead, though, they proclaimed themselves pleased as punch with ARRA which now creates a situation where it’s not clear what they can really say.