JONATHAN CHAIT FEBRUARY 24, 2010
In response to the Congressional Budget Office's calculation that the stimulus increased employment by somewhere between 1 and 2.1 million, Veronique de Rugy has made a chart to show that the stimulus has failed:
"On this chart, I can't see that the private sector has gained any jobs," she comments. "In fact, it's lost 8.7 million in two years." I assume she's just being dishonest here, because anybody with an intelligence level even approaching that of an apple pie would recognize that the claims that the stimulus increased employment are set against a presumed baseline of significant job loss. Her chart is sort of like saying that the people who told me last autumn that I should buy a winter coat are all wrong, because here I am wearing the coat and I'm still colder than I was in October without it.
Indeed, de Rugy's blue line of private sector job level shows that the rate of decline slowed, and then eventually stopped, beginning with the passage of the stimulus. You could say that all the macroeconomic forecasters are wrong and this is just a coincidence. But you can't say that this chart proves, or even suggests, the stimulus didn't work.
Moreover, de Rugy's chart shows that the level of government employment (the red line) has also fallen since the stimulus was enacted. That's another reason why the stimulus was needed. State and local governments must balance their budgets, and an economic catastrophe both dries up tax receipts and swells the need for more spending. This forces governments to enact major tax hikes and spending cuts, which in turn deepens the economic crisis. One of the most important elements in the stimulus was aid to state and local governments to reduce this pro-cyclical effect. Liberals complained that the stimulus, at the behest of moderates, failed to include sufficient aid. And we were right -- de Rugy's chart shows that total government employment has fallen since Obama took office, where it should be rising to help take up labor slack and accommodate rising needs.
The government employment numbers also put into perspective some of the right's fear of the massive Leviathan state Obama has constructed. There are still fewer people on the government payroll now than there were when George W. Bush left office. Of course, there are more than there would have been without a stimulus. But if conservatives want to blame Obama's policies for lower employment, then they also have to "credit" them with reducing people on the government teat. Not that I'd expect intellectual consistency from people obviously engaged in propaganda.