Making Sense of the Stimulus

In this political climate of loud no’s and yesses, good journalism is vital to disentangle all the maybes and what if’s.

As Republicans brand the 2009 stimulus of $787 billion a total failure and Democrats defend it as keeping the recession from getting worse, Ezra Klein of the Washington Post reports what economists and politicians were actually thinking and doing back then.

He cites the 2008 book of Carmen Reinhart and Ken Rogoff, “This Time Is Different,” a study of nine centuries of financial crises: “In their view, the administration wasn’t being just a bit optimistic. It was being wildly, tragically optimistic...

“In March 2009, Reinhart and Rogoff took to Newsweek to critique the ‘chirpy forecasts coming from policymakers around the globe.’ The historical record...showed that ‘the recessions that follow in the wake of big financial crises tend to last far longer than normal downturns, and to cause considerably more damage. If the United States follows the norm of recent crises...output may take four years to return to its pre-crisis level. Unemployment will continue to rise for three more years, reaching 11 to 12 percent in 2011.’”

But nobody in the Obama Administration or Congress was listening. Looking back now, Peter Orszag, who headed the Office of Management and Budget then, tells Klein, “I didn’t realize we were in a Reinhart-Rogoff situation until 2010.”

On the other hand, John McCain’s top economic adviser, Doug Holtz-Eakin, doesn’t think the White House made matters worse: “The argument that the stimulus had zero impact and we shouldn’t have done it is intellectually dishonest or wrong. If you throw a trillion dollars at the economy, it has an impact. I would have preferred to do it differently, but they needed to do something.”

What we are left with from Klein’s much-needed reporting is the conclusion: “These sorts of economic crises are, in other words, inherently politically destabilizing, and that makes a sufficient response, at least in a democracy, nearly impossible...

“That isn’t to say that this time couldn’t have been different or that next time won’t be. But it is no accident that these crises so often turn out the same, in so many countries, with so many types of governments, who have tried so many kinds of responses.

“In general, the policies that are vastly better than whatever you are doing are not politically achievable, and the policies that are politically achievable are not vastly better.”

As discomforting as that may be, there is one heartening sign in this, if not for the economy, at least for American journalism. We have been given this compelling analysis not by a graybeard of the media establishment but a 27-year-old former blogger doing the homework that politicians hope that thinking voters will never see.