Pretty much the gist of it is: We were more screwed then we thought, and our systems of governance are just not good at handling these sorts of problem.
But I will let the man speak from himself on the subject:
To understand how the administration got it so wrong, we need to look at the data it was looking at.
The Bureau of Economic Analysis, the agency charged with measuring the size and growth of the U.S. economy, initially projected that the economy shrank at an annual rate of 3.8 percent in the last quarter of 2008. Months later, the bureau almost doubled that estimate, saying the number was 6.2 percent. Then it was revised to 6.3 percent. But it wasn’t until this year that the actual number was revealed: 8.9 percent. That makes it one of the worst quarters in American history. Bernstein and Romer knew in 2008 that the economy had sustained a tough blow; t hey didn’t know that it had been run over by a truck.
There were certainly economists who argued that the recession was going to be worse than the forecasts. Nobel laureates Krugman and Joe Stiglitz were among the most vocal, but they were by no means alone. In December 2008, Bernstein, who had been named Biden’s chief economist, told the Times, “We’ll be lucky if the unemployment rate is below double digits by the end of next year.”
Here is an updated version of the original graph. The original Romer graph, that was circulated at the time of the initial Stimulus design:
Now I am firmly in the court of those who do not think we did enough. But in some ways we just did not know how deep the hole we were in. However, doing nothing would have left us in a measurably worse situation. I know voters are not interested in counter-factuals, but it still remains true, that even though the scope was too small. What was done had a net positive effect.
Paul Krugman, adds his 2-cents here.
-Cheers
No comments:
Post a Comment