The stimulus works, the stimulus works, the stimulus works reports the Wall Street Journal’s Deborah Solomon:
Economists say the money out the door — combined with the expectation of additional funds flowing soon — is fueling growth above where it would have been without any government action.
Many forecasters say stimulus spending is adding two to three percentage points to economic growth in the second and third quarters, when measured at an annual rate. The impact in the second quarter, calculated by analyzing how the extra funds flowing into the economy boost consumption, investment and spending, helped slow the rate of decline and will lay the groundwork for positive growth in the third quarter — something that seemed almost implausible just a few months ago. Some economists say the 1% contraction in the second quarter would have been far worse, possibly as much as 3.2%, if not for the stimulus.
For the third quarter, economists at Goldman Sachs & Co. predict the U.S. economy will grow by 3.3%. “Without that extra stimulus, we would be somewhere around zero,” said Jan Hatzius, chief U.S. economist for Goldman.
An argument can be made that the stimulus bill should have been even bigger and also included more direct aid to states (and many who made that argument now push for a 2nd stimulus). An argument can also be made, as Solomon notes, that maybe the Federal Reserve’s aggressive and secretive buying of Treasury debt and mortgage backed securities is where the government is helping most.
But the argument made during the stimulus bill debate by almost every Republican in Congress, and a few Democrats, that the stimulus will just run up the national debt is being proven wrong. The stimulus is indeed running up the debt, but so are Republican/moderate-Democrat supported plans like the Afghanistan War, the Iraq War, the 2003 Medicare overhaul, and the Bush tax cuts for the rich. The stimulus is helping the economy significantly more than any of those policies.