Did What Made the Stimulus Effective Make It Unpopular?

The New Yorker's James Surowiecki has an interesting analysis of how many of the qualities that made the Obama administration's economic stimulus package effective also made it less popular.

.. [B]y any reasonable measure, the $800-billion stimulus package that Congress passed in the winter of 2009 was a clear, if limited, success. The Congressional Budget Office estimates that it reduced unemployment by somewhere between 0.8 and 1.7 per cent in recent months. Economists at various Wall Street houses suggest that it boosted G.D.P. by more than two per cent. And a recent study by Mark Zandi and Alan Blinder, economists from, respectively, Moody’s and Princeton, argues that, in the absence of the stimulus, unemployment would have risen above eleven per cent and that G.D.P. would have been almost half a trillion dollars lower. The weight of the evidence suggests that fiscal policy softened the impact of the recession, boosting demand, creating jobs, and helping the economy start growing again. What’s more, it did so without any of the negative effects that deficit spending can entail: interest rates remain at remarkably low levels, and government borrowing didn’t crowd out private investment.

Yet polls show that a majority of those surveyed think the stimulus either did nothing to help, or even hurt the economy, and are opposed to another stimulus. Republicans (of course) have helped promote this misconception by conflating the bank bailout with the stimulus, as when Rep. Mike Pence of Indiana refers to "bailout stimulus."

Bizarre as it may seem, a less well-designed stimulus might have been more popular, and that would have made it easier for Obama to sell the electorate on his new stimulus proposals. But, given the scope and depth of the recession, it’s also likely that any stimulus would have become a political albatross. As Jonathan Baron—a professor at the University of Pennsylvania who studies the role of psychology in public policy—has discussed, if you take action and things go wrong, you’re often held more responsible than if you do nothing, even when the failure to act would lead to a disastrous outcome.... It’s a harsh lesson: when Rome is burning, trying to put out the fire may cost you more than just sitting by and fiddling.

Read the whole article

Hat tip to Political Wire for flagging Surowieki's article.