House Republican Leader John Boehner delivered a stinging critique of Obama Administration economic policies at the City Club of Cleveland on Tuesday in which he said that “all this stimulus spending has gotten us nowhere.”
When asked about that statement at a Monitor-sponsored breakfast for reporters on Wednesday, Mark Zandi, chief economist of Moody’s Analytics and co-founder of Economy.com, said, “That is just wrong; the stimulus has been very helpful.”
Mr. Zandi was an advisor to John McCain’s presidential campaign. The Wall Street Journal has called him “the de facto chief economist to Congress.”
In noting his disagreement with the Republican leader, Zandi said “we would be in a measurably worse place if not for the stimulus. I don’t think it is any coincidence that the great recession ended at precisely the same time that the stimulus, and in this case when I say stimulus I am talking about the [American Recovery and Reinvestment Act] … was providing its maximum economic benefit.” That maximum benefit came in the second and third quarter of 2009, Zandi said.
What would have happened without the Recovery Act’s fiscal stimulus?
“If we had not had the stimulus, estimates that are put forward for example by the Congressional Budget Office are exactly right. We would have 2-1/2 to 3 million fewer jobs today than we actually have. So employment – payroll employment – is off 8 million jobs from the peak. If we had not had the stimulus we would be off by about 11 million jobs,” Zandi said.
Rather than a national unemployment rate of 9.5 percent, “we would have an 11.5 percent unemployment rate,” he added.
The federal government’s stimulus effort, which totaled close to $1 trillion or 7 percent of gross domestic product, “certainly has not helped as much as anyone would like, although I think that is just a matter of expectations. I think the expectations were wrong,” Zandi said. “They were misplaced. But the stimulus did exactly what it was intended to do. It was to end the recession and jump start a recovery and it did that.”