Menzie Chenn and Mark Thoma: Stimulus Redux

UW-Madison Professor of Public Affairs and Economics, Menzie Chenn, revisits the oft contended American Recovery and Reinvestment Act of 2009. Chenn finds fault in the “massive” descriptor which is often added to the stimulus package and tries to put the stimulus’ budgetary effect in context with the Bush tax cuts of 2001 and 2003, spending on the Iraq War in 2010, and the Affordable Care Act (Obamacare) with this graph:

Mark Thoma sounds off on the redux:

Menzie Chinn makes a point I’ve been trying to emphasize (with less than full success). When people ask why the fiscal stimulus didn’t do more to elevate the economy, the right question to ask is what fiscal stimulus? When the federal efforts are combined with the contractions at the state and local level, there was very little net stimulus. That doesn’t mean the federal efforts didn’t do something positive and important — if the federal government hadn’t offset the state and local contractions things would have been even worse — but it does mean that people looking for more than simply treading water as evidence that the fiscal stimulus had an impact are asking the wrong question…