How will we know if President Obama's must-have "stimulus" program succeeds? Politicians grab credit for everything, so we should come up with a way to measure success. Obama said, "I expect to be judged by results." Let's oblige him.
It won't be easy. Obama promises to "save or create" 3.5 million jobs, but if the unemployment rate is unchanged in four years, do we credit Obama for saving 3.5 million jobs that would have been lost?
If new jobs are created, should stimulus get the credit? If the gain is in the government sector or in areas fed by taxpayer money, how do we know that the job creation didn't crowd out the creation of more and more productive jobs?
If the gain is in the private sector, Obama's boosters will claim credit on the basis of the "multiplier effect." It's a favorite theory of politicians and their court economists that government spending has a bigger economic jolt than cutting marginal tax rates does. But not everyone is so sure. (Harvard economist Gregory Mankiw, for one.)
The bottom line is that a lower unemployment rate will not prove that Obama's "stimulus" worked.
Given time, the economy, unless totally crippled by government intervention, will regenerate itself. That's because an economy is not a machine that needs jumpstarting. It is people who have objectives they want to achieve. They will not sit on their hands forever waiting for government to "fix" things. Instead, they work to overcome obstacles to get what they want. Some banks are struggling, but there are still people who want to lend money and people who want to borrow it. They will find each other without government help.
During the Great Depression, many Americans kept producing in spite of the burdens imposed by the FDR's New Deal. (Amity Shlaes calls these "the forgotten man".) Likewise today, economist Steven Horwitz writes, "[T]he American people are already doing something to create wealth and hasten the recovery, even if we are the ones forgotten in the battle over what Washington should do. Americans are going to work every day and providing for their families ... increasing their savings rates, making much needed capital available to the private sector ... imagining new and more efficient ways to use valuable resources."