The Economic Stimulus Bill and the GDP

January 30, 2009

As President Obama’s economic stimulus bill works its way through Congress, sagging GDP numbers show that this is not a typical recession says Senior Fellow Isabel Sawhill.


“I think the stimulus package has to be evaluated on three grounds. The first is does it do a good job of getting the economy moving quickly, and there I’ve given about an A-minus. Second, I think we have to look at whether or not it’s good policy in terms of reforming programs in various ways that I think many people agree are needed now, and there I give it somewhat lower grade maybe a B-minus, but that has to be understood in the context of there hasn’t been time to do the thorough going reform that maybe needed in some areas. A third criteria is does it balance off the need for short term stimulus with the need for long term fiscal restraint, and there I think it’s lacking, and I give it about a C-plus.”

“…It’s very difficult when you are trying to put together a package that is this large, and do it this quickly to get everything right, so I would give the people who had to work on this a lot of lee way for some errors. We are not going to be able to do this perfectly, so even though I might have wished that there were more program reform in the bill I have to say that that’s not the major purpose of the bill the major purpose of the bill is to stimulate the economy, and on those grounds I have to give it overall good grade.”

“…The recent release of the GDP numbers suggests that we are really in a deep hole, and things are going to get worse before they get better. This is not a typical recession. There have been analysis now that have been done that show if you just look at the recession that have preceded by a financial crisis as opposed to the normal business cycle which is not preceded by financial crisis, those recessions are much longer, much deeper, and require a different kind of policy reform than a normal business cycle, so we are in uncharted waters, we are going to have to try a lot of different things to move forward, and get back to prosperity.”