The simple problem that ljcdad and even Krugman have in defending the stimulus is that they not only have to defend the results but there is questionable application, timing and the theory itself. However unfair that might be, it’s not their fault that policy is a mixed bag at best, it still comes down to the fact that there were serious indicators that it would not work to the extent hoped for from the beginning. Even the possible explanations for its failures are hindered by the actual policy.
Obama’s stimulus policy was unforgivable. He over extended himself and the country without effectively managing the situation. Contrary to accusations that he didn’t do anything it’s my contention that he attempted too much consecutively, while neglecting to get resolution on one thing prior to switching topics and working on this. As they attempted to manage the housing crisis, the war, the auto bailouts, the banking collapse and healthcare all at the same time, the Whitehouse over thought nearly everything and held no standard position on much. It’s a miracle the auto bailouts worked as well as they did. Healthcare and the stimulus package became these grandiose inventions barely resembling the premises they were based on. You can feel the manic energy and self-congratulations in the bills that eventually got passed.
As we look to the actual premise the stimulus was based on, the multiplier effect of government spending on consumption, the answer to why that would fail is due to many factors, economic, societal and philosophical. Yes, the stimulus put some people back to work eventually but it was inefficient at best. And if we took a look at Keynes and the way he saw the world I am certain he didn’t see our society. I can’t recall if Keynes saw aggregate demand as large a percentage of the GDP in a modern free market society although I’m certain he could not have seen the extreme personal debt to maintain that consumption in the US. In comparing the US and Canada, one economist notes that consumption is almost 70 percent of GDP on average for the US and growing, while the percentage of consumption to GDP for Canada was around 60 and only slightly increasing. Most liberals like Ljcdad would argue that increased consumption is a good thing, but in a world vastly different from the early 1900’s when most goods and services came your area if not your country, this is not effective policy let alone theory.
That is to say that as we lose jobs and wages to productivity and global trade it’s a safe bet that although there was some increase in jobs due to infrastructure work in the stimulus that would only have a multiplier effect if there was little to no personal unsecured debt and more available US products at a similar price to imports. Add in all the potential products they could buy that have no real effect on employment, such as a better cable package or more online games and the premise behind the stimulus fails completely. Ljcdad was stuck in theory that failed to fit the real world circumstances.