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Measuring the success of the stimulus
Members of the Senate and House Appropriations Committees meet in conference at the LBJ Room at the U.S. Capitol in Washington D.C., where they and agreed on a $789 billion package.
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KAI RYSSDAL: Officially it's still under negotiation in a House-Senate conference committee, but it's fair to say the stimulus package the president will sign sometime soon is going to look a lot like the agreement announced yesterday. A $789 billion bag of mixed economic polices. The president had nice things to say about the Congressional version of the plan -- that it's still going create or save 3.5 million jobs. Even if it does, is that going to be enough to drive up consumption and actually stimulate the economy? And if it does, how would you measure that, anyway?
From Washington, Marketplace's Nancy Marshall Genzer has more.
NANCY MARSHALL GENZER: Everybody gave up something in the congressional negotiations over the stimulus bill. There'll be less money for school construction and tax cuts. Workers will now only see about 13 extra bucks a week from the payroll tax cut. That may only increase consumption at the dollar store.
ALAN BLINDER: I would like it to have been bigger.
Alan Blinder teaches economics at Princeton.
BLINDER: Unfortunately a lot of what happened in the compromising and scaling back of the program took some of the stimulative bite out of it.
Still, Blinder says, it's better than nothing. Low-income consumers tend to spend every extra dollar they get, so they could help stimulate the economy. Tax cuts for businesses are designed to get them to boost production. But companies will only hire and buy new equipment if they think the economy is improving. Tyler Cowen teaches economics at George Mason University. He says stimulus money for local governments will at least stabilize consumption.
TYLER COWEN: Because they will otherwise be cutting their spending now, and that can to some extent be prevented. More of the bill should do that.
As it is, Cowen thinks it'll take a year for the stimulus spending to have any effect on consumption. Nigel Gault says we could see some small growth at the end of this year. Gault is chief U.S. economist at IHS Global Insight. He's tried to measure the impact of the stimulus.
NIGEL GAULT: You know it may reduce the peak unemployment rate perhaps by about a percentage point.
But Gault says there's a wide margin for error. The White House uses complex formulas to figure out the impact of each stimulus dollar. But Gault says models don't always work. They assume people and businesses will act a certain way. But that's not always the case, especially during a recession, when caution is the rule.
In Washington, I'm Nancy Marshall Genzer for Marketplace.
Silly question, but I just have to know: What is music played during the podcast at 17:32 seconds in? I've been looking for the source of that music for years and then suddenly I heard it on the radio. The music listed on the podcast page doesn't seem to be it.
Blinder wow. He has written many articles on the fears he has on offshoring. Speaking of not measuring things... We are not measuring the level of ouffshoring corporations are doing while they are still uncertain about our economy, they are replacing all kinds of jobs with cheap labor in places like India. You should have asked him if he would like to see the BLS begin to measure the level of offshoring we are doing. I am sure he would have said yes. The problem with the spending model right now is that it is assuming that we are a "shovel ready" economy when in fact we are an information services economy. This is rooted in the dark ages. Giving Americans hard labor jobs are not going to bring back the ones we are offshoring.
