The University of Chicago's IGM Forum:
Poll Results | IGM Forum: Question A: Because of the American Recovery and Reinvestment Act of 2009, the U.S. unemployment rate was lower at the end of 2010 than it would have been without the stimulus bill.
At the time, back at the start of 2009, arguments that the Recovery Act would not push the unemployment rate down over the two years after its enactment took one of three lines:
Unemployment is really not cyclical but structural, so whatever boost to spending it might generate would show up in higher prices and wages as businesses trying to satisfy demand bid against each other for a fixed pool of non-zero-marginal-product workers.
Government purchases must be financed by issuing government debt, and debt issues would push up interest rates and so would discourage private investment spending.
Government purchases must be financed by issuing government debt, and the future taxes needed to amortize the extra debt would frighten businesses and investors, so we would see equity prices tank as this fear would discourage private investment.
None of those things happened. And that is why the Chicago panel agrees 80%-4% with the statement that the Recovery Act the unemployment rate in 2010 below what it would otherwise have been.
And in this context it is worth noting that the two members who want to go on record agreeing with the Republican Party line and disagreeing with the statement appear to do so very carefully. We have only two of their polled economists: Caroline Hoxby and Ed Lazear, both of Stanford:
Note that Hoxby appears to be evaluating a different statement--that the ARRA was worth doing--rather than the question asked--that the ARRA reduced the unemployment rate in 2010 below what it would otherwise have been. At least, that is how I read her claim that "the depressing effects of future liabilities likely exceed benefits".
And note that Lazear's comments--"the estimates [of the Recovery Act's effects] are varied and the highest are based on ex-ante models, not experience-based data. The upper bound estimate is low"--appear to justify the position that he is uncertain about the truth of the statement, not that he disagrees with the statement.
From one perspective, this is quite heartening: 183 years after John Stuart Mill and Jean-Baptiste Say agreed that Say's Law applies in the long run but not in the short business-cycle run, 4 years after what John Quiggin calls its zombie-like rising from the grave, the claim that increases in government purchases must by the metaphysical necessity of the case--no matter what happens to asset or commodity prices--crowd out an equal and opposite amount of private spending appears to be dead.
To Be Continued...