Did the Stimulus Work?

Spending 2-3 hours on the D.C. beltway (yeah it took me that long to get from Rockville to Ellicot City tonight) does not put you in best frame of mind, but I took a break from tech stuff and catch up on some politics, for a change and actually blog instead of tweet. Apart from the campaign-style movie above, there is Judging the Stimulus by Job Data Reveals Success with the key argument as

The case against the stimulus revolves around the idea that the economy would be no worse off without it. As a Wall Street Journal opinion piece put it last year, “The resilience of the private sector following the fall 2008 panic — not the fiscal stimulus program — deserves the lion’s share of the credit for the impressive growth improvement.” In a touch of unintended irony, two of article’s three authors were listed as working at a research institution named for Herbert Hoover.

Of course, no one can be certain about what would have happened in an alternate universe without a $787 billion stimulus. But there are two main reasons to think the hard-core skeptics are misguided — above and beyond those complicated, independent economic analyses.

The first is the basic narrative that the data offer. Pick just about any area of the economy and you come across the stimulus bill’s footprints.

In the early months of last year, spending by state and local governments was falling rapidly, as was tax revenue. In the spring, tax revenue continued to drop, yet spending jumped — during the very time when state and local officials were finding out roughly how much stimulus money they would be receiving. This is the money that has kept teachers, police officers, health care workers and firefighters employed.

Then there is corporate spending. It surged in the final months of last year. Mark Zandi of Economy.com (who has advised the McCain campaign and Congressional Democrats) says that the Dec. 31 expiration of a tax credit for corporate investment, which was part of the stimulus, is a big reason.

Let's hope so.