Jared Berenstein is still fraudently wrong

Jared: It was five years ago this month that the new president signed the $800 billion Keynesian stimulus package, also known as the Recovery Act.  A few weeks later, he put Vice President Joseph R. Biden Jr. in charge of overseeing its implementation.  As the vice president’s chief economist at the time, as well as a member of the economics team that helped to shape the package, I was an active participant in this important chapter of our economic history.

He imposes his priors. His implied claim is that the increase in debt to gdp from 2008 to 2014 was nmainly because we didn't increase it fast enough from 2008 to 2011, the stimulus. In other words, most of the additional debt to gdp was due to a failure of government to fix the economy. Bill McBride, of calculated Risk, praises that view, mainly because he is can't do the math.

The distinction between debt raised by Congress and called stimulus and debt raised by Congress and called something else is plain BS, a prior belief mainly used to cover up really bad multipliers. The stimulus was $800 out of a 16 trillion dollar economy, about 5% of GDP. The economy rose about 10% during the period. But total additional spending above baseline debt to GDP was about 50%.  So Jared wants to say the the total rise in debt was mostly economic error, but the stimulus portion of that was a corrective adjustment.

What corrective adjustment was that exactly? Shovel ready projects that were previously unfunded. But that is true of the entire 50% increase in debt to gdp during the period. It was all shovel ready projects that were unfunded, in fact, it was almost all the previously unfunded government plans.  Unfunded mainly because the broken economy could not afford them.  So what did DC do? DC took all the unfunded projects from 2008 until 2013 and funded them with new debt.

How is the one different than the other? The total stimulus was everything unfunded in 2008 but now funded with debt in 2013, and that multiplier is low, about .25. Jared has no basis for calling some of it stimulus and some of it normal debt.