Casey B. Mulligan is a professor of economics at the University of Chicago and, by all reports, knows his stuff. He knows it well enough that the New York Times published an article from Mulligan in today’s paper titled, “Chump Change in the Latest G.D.P. Report.” In it, Mulligan squarely rebuts the spin that the latest GDP report proves the stimulus package is working. To the contrary, he says:
On Friday, the Bureau of Economic Analysis released its advance estimate of real G.D.P. for the second quarter of 2009. Although some say it provides some of the first evidence of the stimulus law’s efficacy, a close inspection of the results shows that the government sector’s contribution to real G.D.P. growth so far has been trivial at best.
Some advocates were quick to congratulate the stimulus law that was passed in February, claiming that “The marked improvement in this quarter relative to last is largely due to the American Recovery and Reinvestment Act (ARRA).”
A closer inspection of the B.E.A.’s estimates gives no support for this claim.
Mulligan breaks down the reported changes in GDP by spending category from Q1 to Q2 of this year and graphically shows that the increases in the spending categories allegedly targeted by the “stimulus” bill – federal nondefense and State & Local goverment – have seen trivial increases.
For the all hurried, frenzied action and the calls of crisis that we heard and all of the promises made, we were supposed to be expecting a significant improvement and that hasn’t happened. Which, I might add, is what many of the opponents of that stimulus package said was going to happen. The approach used in that bill was the wrong one and throwing more money into it isn’t going to suddenly make it the right one.
Read all of Professor Mulligan’s article for more detail.