In the religious ecstasy of early 2009, when Barack Obama was yet in mid-ascension operating the "Office of the President-Elect" (complete with custom-made seal), he was campaigning hard for his stimulus plan.
On January 10 of that year, the Obama "administration-in-waiting" released a report by its chief economists Christina Romer and Jared Bernstein titled "The Job Impact of the American Recovery and Reinvestment Plan." The thrust of the report was to show how the stimulus plan was far preferable to doing nothing.
"In the absence of stimulus, the economy could lose another 3 to 4 million more [jobs]," Romer and Bernstein estimated. With the stimulus, "we believe a reasonable range for 2010Q4 is 3.3 to 4.1 million jobs created."
The report included a handy graph (ours being such a visually motivated society) that showed exactly the choice we faced. Without the recovery plan, unemployment would peak at a whopping and then-unfathomable 9 percent through the first three quarters of 2010.
With the recovery plan, however, unemployment would peak at just below 8 percent by late 2009 and steadily fall to 7 percent by the end of 2010. By now it would be around 6.6 percent.
Hundreds of other economists, including some Nobel laureates, warned against the folly of the stimulus plan. In full-page ads in major newspapers across the U.S., the Cato Institute published their open letter to the president, which stated,
More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan's "lost decade" in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.