I testified today to a a subcommittee of the House Oversight and Government Reform Committee looking at the effects of the 2009 stimulus bill (the "American Recovery and Reinvestment Act").
Some of the discussion regarded the continuing claims by stimulus supporters that the $800 billion bill created millions of jobs. To most people, such a claim now seems laughable--unemployment is still very high two years later and the recovery from the recession is very sluggish compared to prior recessions.
Also testifying was Stanford economist John Taylor, who offered a view on why economists using Keynesian models are still claiming success for the ARRA bill:
"Why do some argue that ARRA has been more effective than the facts presented here indicate? Many evaluations of the impact of ARRA use economic models in which the answers are built-in, and were built-in before the stimulus package was enacted. The same economic models that said, two years ago, that the impact would be large now show that the impact is in fact large."
Taylor's testimony looks at the actual effects of the stimulus in the national income accounts data, rather using an assumption-filled model. Taylor concludes:
"In sum, the data presented here indicate that the American Recovery and Reinvestment Act was not effective in stimulating the economy ... Currently, the increased debt caused by ARRA—both directly through its deficit financing and indirectly through its de-emphasis on controlling spending—is likely a drag on economic growth."
Thanks to Tyler Grimm and the committee team for organizing the hearing. It's important to explore the costly failures of such big spending programs as ARRA because the next time the economy goes into a downcycle the Keynesians, sadly, will be back to Capitol Hill pushing their expensive solutions and further bankrupting the nation.