Conservatives were fast jump on the blame wagon claiming that the rise in unemployment was all Obama’s fault and due to the oh so scary stimulus. On the other hand liberals knew that this double dip was a distinct possibility because of the anti-stimulus measures imposed on the government by both the Republican congress and by State governments.
Let’s go over the recent economic history, from the below chart of government spending, stimulus started in the fourth quarter of 2009 and rose peaked in quarter 1 of 2010 and then plunged. Whats more, despite repetitive conservative parroting about the massive amount of spending going on, the actual stimulus was not even enough to compensate for the decreases in State government spending. At the peak of the so call stimulus, the increase in the total annual government consumption expenditures and investment was only 2.57%, just barely above the 2.54% average rate of increase since 1980. In other word’s the Federal government stimulus combined with state anti-stimulus led to net, below average growth in government spending.
By the first quarter of 2011 the effect of spending cuts to stimulus has dried up and State governments were slashing spending more. Then, despite the warnings of experts on the subject, the newly elected tea party Republicans heroically decided to pursue an anti-stimulus pro-austerity policy, further slashing spending.
Now look at the other line, the change in employment, as you can see the paltry stimulus was able to quite slowly reverse the negative trend in employment growth and bring it into the low positive numbers. But the growth was fragile and after a year anti-stimulus we are back to where the experts warned us we would be, last month employment actually started shrinking again.
Now for comparison, lets look at a real stimulus by an evil socialist liberal … ummm … Ronald Reagan, well not so liberal but then again the post-tea party Republican party has swerved far far right of the gipper into the magical land of Reagan-never-increased-spending because that’s not how the far right version of history goes.
According to the far right version of history, Reagan got us out of the early 80′s recession with good old conservative small government, yet in reality government consumption and investment increased at well above the average rate during Reagan’s term. Although he certainly did make cuts to social programs, any cuts he made were dwarfed by his massive increases in spending, especially military spending. In his 1983 budget his spending increases were about 53 times larger then his cuts leading some conservatives to accuse Reagan of run away spending.
Although one may certainly disagree with what programs Reagan was increasing, Reagan’s spending certainly counted as a massive stimulus package far out pacing Obama’s. Because of it’s size, it was able to not only pull employment out of the slump, but keep it out.
Clearly the lesson of history is that stimulus does work at getting an economy out of a slump and austerity will simply prolong your recession. Although what is required is more stimulus now, it is highly unlikely that any will be passed. However it’s even sadder when you realize that Obama and stimulus will get blamed for the result of unsound anti-stimulus policies.