A reader sends me these comments about my chart this morning:
The “stimulus spent” is almost a straight line, which surprises on two levels:
1) The Administration’s rhetoric implied that the stimulus spending would be front-loaded, so that the curve would have an initial steep rise and then flatten. Many commentators at the time predicted that it would be back-loaded so that the big spending would occur in Spring 2010 to prep the economy for the elections. And yet it seems that the actual spending is so evenly distributed in time that much of it will happen far too late to have any impact on the economy before the elections. (If only about $300 billion out of $800 billion has been spent to date, how much more scheduled spending is there, factoring out the part of the stimulus that was in the form of “tax cuts”?)
2) The straight line indicates that the stimulus now sort of a constant monthly injection, and its effect on the unemployment rate is either negligible or (if we take the Administration’s original projections seriously) actually deleterious — as you noted, the rate is higher than the Administration projected it would be if they did nothing at all. For all the jobs “saved or created” by the stimulus, far, far more must have been “lost or destroyed” by it in order for it to worsen the unemployment situation from the do-nothing baseline. And now the economy is like an addict on methadone maintenance: the monthly injection may not be helping, but the Administration doesn’t want to deal with the pain it anticipates if it forces the economy to go “cold turkey” without that shot.
I agree. I should add, however, that this data is from Recovery.gov, meaning that it doesn’t take under consideration the tax cuts and entitlement spending (unemployment benefits and food stamps) in the stimulus bill. Think about this data as the “shovel ready” side of the Recovery Act. That being said, the reader is right. In fact, the data shows that there is no correlation between unemployment levels and how the money is spent.
Here is the best analogy I can think of to explain why this money can’t create sustainable jobs and, in fact, gets in the way the recovery. Imagine that you break your arm and you don’t get it looked at by a doctor. Instead, your friend gives you shots of morphine. Obviously, you may feel better in the short term, but, when the morphine goes away, the pain comes back and your arm still needs to be fixed. More important, while you are not getting the proper treatment for your arm, your body will almost surely begin to try to put itself back together again, but it is unlikely that the bones will end up in the proper position. This will surely mean chronic pain in the long run.
Stimulus spending is like morphine. It might feel good in the short term (there is no doubt that the people who receive the money are happy to get it) but doesn’t help repair the economy. It even causes more damages if it gets in the way of a proper recovery.