Understanding Government

The New York Times’ Jackie Calmes and Michael Cooper had a pretty informative piece about the stimulus yesterday with the useful takeaway that the package is, more or less, working. It’s been one of the most popular articles on the Times Web site this weekend and could turn into a piece that journalists and commentators refer to when making overall arguments about the stimulus and Obama’s economic policies.

But the piece has a major flaw: it’s constructed around the argument that the split-the-middle bill agreed to by the Obama administration and Congress has turned out better than either the liberal Democratic proposition of more spending and less tax cuts or the conservative Republican proposition of simply tax cuts and tax credits. The problem is that the actual reporting compiled by the Times comes to a much different conclusion: that the liberal proposition was plainly correct — preferable to either what conservatives proposed or what was actually enacted.

Calmes and Cooper thesis sentence, as it were, is, “In interviews, a broad range of economists said the White House and Congress were right to structure the package as a mix of tax cuts and spending, rather than just tax cuts as Republicans prefer or just spending as many Democrats do.”

But read a little further and we get a ton of economists assert that while the stimulus has worked it could have worked even better with more spending — and fewer tax cuts:

Optimistic assumptions in turn contributed to producing a package that if anything is too small, analysts say. “The economy was weaker than we thought at the time, so maybe in retrospect we could have used a little bit more and little bit more front-loaded,” said Joel Prakken, chairman of Macroeconomic Advisers, another financial analysis group, in St. Louis.

While some conservatives remain as skeptical as ever that big increases in government spending give the economy a jolt that is worth the cost, Martin Feldstein, a conservative Harvard economist who served in the Reagan administration, said the problem with the package was that some of its tax cuts and spending programs were of a variety that did little to spur the economy.

“There should have been more direct federal spending that would have added to aggregate demand,” he said. “Temporary tax cuts and one-time transfers to seniors were largely saved and didn’t stimulate spending.”

Even the $787 billion price tag overstates the plan’s stimulus value given changes made in Congress, economists say. Nearly a tenth of the package, $70 billion, comes from a provision adjusting the alternative minimum tax so it does not hit middle-income taxpayers this year. That routine fix, which would do nothing to stimulate the economy, was added in part to seek Republican votes. But to keep the package’s overall cost down, provisions that would stimulate the economy — like aid to revenue-starved states and infrastructure projects — got less as a result.

I kept reading the piece, waiting for a rebuttal. Surely among the “broad range of economists” Calmes and Cooper interviewed some must have countered these assertions by saying that the level of spending versus the level of tax cuts was either just right or that there should have been more tax cuts. Surely the piece will expand upon why conservative skepticism is perhaps justified. But the piece ends with even more explicit analysis that liberal spenders were right and conservative tax-cutters were wrong:

Every dollar of additional infrastructure spending means $1.57 in economic activity, according to Moody’s, and general aid to states carries a $1.41 “bang” for each federal buck.

Even more effective are increases for food stamps ($1.74) and unemployment checks ($1.61), because recipients quickly spend their benefits on goods and services.

By contrast, most temporary tax cuts cost more than the stimulus they provide, according to research by Moody’s. That is true of two tax breaks in the stimulus law that Congress, pressed by industry lobbyists, recently extended and sweetened — a tax credit for homebuyers (90 cents of stimulus for each dollar of tax subsidy) and extra deductions for businesses’ net operating losses (21 cents).

Economists said Republicans’ recent proposals to rescind unspent money would be a mistake.

Clearly, the evidence Cooper and Calmes marshal about economists’ views on the stimulus should point to one conclusion: economists believe that liberal Democrats who wanted to spend billions of government money on economic stimulus are absolutely in the right. Republicans who instead want tax cuts not stimulus spending are absolutely in the wrong. Maybe Cooper and Calmes or their editor felt uncomfortable with the unmistakably partisan consequences of their analysis. But it was someone at the Times who chose the premise: What do economic experts, not politicians, think about the stimulus? It was a good idea for a story, but Cooper and Calmes obscure their results and, in the process, confuse their vast readership.