Brian Riedl of the Heritage Foundation examines the new Congressional Budget Office finding that the stimulus package “saved or created” 1.5 million jobs and notes that CBO made a series of assumptions about the value of every dollar spent — for example, that “every $1 of government spending sent to state and local governments for infrastructure ultimately raises GDP by $1.75.” According to its calculations, the stimulus led to GDP growth of 2.6 percent.
There will be a great deal of debate and discussion about these numbers, all of which will have to do with the degree of credit that should attach to the stimulus package, those who voted for it, and President Obama for the economic growth it undoubtedly provided. But in fact, none of that debate and discussion will matter at this point except as an intellectual exercise. It will be very important in that respect for the future. But not now. Now the question is simply this: Will the voting public feel that a trillion dollars in government spending had the effect of improving things for the American people?
For the stimulus to have any political oomph, it will not be enough for the public to feel that things would have been worse without that trillion dollars. The price tag is simply too high for that, and the sense that the spending has burdened them with debt is too powerful. Without sustained economic growth and a resulting increase in employment, the stimulus will have felt like a failure, which is what it feels like today. And that feeling is the primary cause of the political crisis that Obama and his party find themselves in. They can try to argue their way out of it, or spin it — which is what Riedl accuses CBO of doing with the generosity of its assumptions — but it won’t do any good. People will make political choices based on how the world seems to them, and there will have to be a stunning acceleration of good news for those political choices to go any way but calamitously for Obama’s party for the foreseeable future.