Topic+01

=Topic 1: The economic policies of the Obama administration have failed to address the core problems faced by the US economy and society today .=

Key Excerpts from Suggested Sources: (for full articles, click on titles)
=Missing the Target=

Unlike previous recessions, the current downturn was not caused by Federal Reserve tightening and therefore couldn't be reversed by lowering interest rates. President Obama was correct to conclude that boosting economic activity required a fiscal stimulus. Unfortunately, despite the talented team of economists in the administration, most of the president's economic policies have done little to help the problem. And indeed, many of these policies have created even more problems than they solved. For starters, the president allowed congressional Democrats to design the $787 billion stimulus package. The result was an unnecessarily large increase in the national debt for a very modest rise in gross domestic product, with too much emphasis on redistributing income and preserving public-sector jobs and not enough on raising economic activity. Only about one-fourth of the nearly $800 billion will be used for government spending that adds directly to GDP. In contrast, the funds given to households will be largely saved or used to pay down existing debts. And the dollars that went to state governments relieved pressure to use their "rainy day" funds or levy temporary tax increases.

Better Ways to Go
The flaw in the stimulus package wasn't, as some say, that it was too small. It was that it was poorly targeted. Instead, Congress and the president could have gotten more stimulus from accelerating the repairing and replacing of equipment in the civilian and defense sectors. Long-term reductions in marginal tax rates of the type used by Presidents Kennedy and Reagan would also have been better than temporary tax cuts that have no positive incentive effects. Other programs by the administration have had similar failings. "Cash for clunkers," for instance, was successful in raising auto buying and gave a temporary boost to GDP, since two-thirds of the third-quarter GDP rise was motor-vehicle production. The credit for first-time home buyers also gave a temporary boost to the housing market. But both programs just borrowed demand from the future... —Dr. Feldstein, chairman of the Council of Economic Advisers under President Ronald Reagan, is a professor of economics at Harvard University.

The Necessity of Obamanomics: Labelling the president a tax-and-spender is facile given the challenges he faces.
By ROBERT B. REICH, Wall Street Journal, Feb 5, 2010.

Alright class, here's your assignment: Look at President Obama's budget proposal, spending freeze, jobs bill, stimulus, tax hikes on upper-income individuals, and proposed deficit commission. Also take a look at the fees he wants to impose on the biggest banks, and his proposed regulations of Wall Street. Look at his stalled trade agenda. Now, explain the big picture. If you're about to write "more taxes and more spending," you're either not thinking hard enough or you're a Republican running for office this November.

To see the big picture you need to keep your eye on three big things. The first is the extent of government spending needed to offset the continued reluctance of consumers and businesses to spend. You don't have to be an orthodox Keynesian to understand that as long as the private sector is deleveraging the public sector has to borrow and spend in order to keep the economy moving forward. Spending on the original stimulus will peak soon; spending for additional unemployment insurance and the jobs bill will add about $90 billion. But even this sum is not likely to be enough to make up for the shortfall in private spending. Consider also that state and local governments are slashing jobs and services—while raising taxes by about $350 billion over this year and next—so the feds probably need to spend even more.

Just look at projected unemployment. The Council of Economic Advisors foresees 10% unemployment through the rest of 2010, falling only to 9.2% in 2011. The result is a giant drag on the economy, not to mention pain for millions of American families. High unemployment also allows firms to keep wages low. That's good for corporate profits but not for the overall economy. America can't have a vigorous recovery when consumers are this anxious about jobs and wages....

The federal budget deficit is a huge problem, to be sure. But if you want an A in this course you need to distinguish between deficits occurring this year and next when the economy is still trying to climb out of a hole, and deficits five to 10 years from now. If government doesn't spend enough in the short term to get jobs back, those out-year deficits will be even larger because tax revenues will be lower then, and government will be spending more on unemployment benefits. The public doesn't quite get this distinction, which is probably why the president thought it necessary to freeze discretionary nonmilitary spending. The freeze is little more than a symbolic gesture, accounting for only about 17% of the budget....

The second big thing involves the post-war baby boomers, now speeding toward retirement. Neither party wants to deal with the inevitable consequences for Medicare and Social Security. Don't get confused by the size of the numbers at stake. Pay attention to the ratio of cumulative debt to the size of the national economy. That will tell you how easily we can manage the debt. The debt-to-GDP ratio right now is close to 53%—still in the manageable zone. But after the boomers hit retirement, it will soar. One of the most telling figures in the president's budget document is the Congressional Budget Office's projection that by 2020 the debt-to-GDP ratio will be 77%, assuming no entitlement reforms. That's bad news. The ratio is moving in the wrong direction. At some point, the dollar could tank and interest rates explode. [Full article is behind the Wall Street Journal paywall, so here is a copy:]

=Huge Deficits May Alter U.S. Politics and Global Power= By [|DAVID E. SANGER] New York Times, February 2, 2010News Analysis

Washington — ...By [|President Obama]’s own optimistic projections, American deficits will not return to what are widely considered sustainable levels over the next 10 years. In fact, in 2019 and 2020 — years after Mr. Obama has left the political scene, even if he serves two terms — they start rising again sharply, to more than 5 percent of gross domestic product. His budget draws a picture of a nation that like many American homeowners simply cannot get above water. For Mr. Obama and his successors, the effect of [Obama's budget] projections is clear: Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded... Or, as Mr. Obama’s chief economic adviser, [|Lawrence H. Summers], used to ask before he entered government a year ago, “How long can the world’s biggest borrower remain the world’s biggest power?”.... Mr. Obama’s budget deserves credit for its candor. It does not sugarcoat, at least excessively, the potential magnitude of the problem. President [|George W. Bush] kept claiming, until near the end of his presidency, that he would leave office with a balanced budget. He never got close; in fact, the deficits soared in his last years. Mr. Obama has published the 10-year numbers in part, it seems, to make the point that the political gridlock of the past few years, in which most Republicans refuse to talk about tax increases and Democrats refuse to talk about cutting entitlement programs, is unsustainable. His prescription is that the problem has to be made worse, with intense deficit spending to lower the unemployment rate, before the deficits can come down. ... Mr. Summers said that “through the budget and fiscal commission, the president has sought to provide maximum room for making further adjustments as necessary before any kind of crisis arrives.” Turning that thought into political action, however, has proved harder and harder for the Washington establishment. Republicans stayed largely silent about the debt during the Bush years. Democrats have described it as a necessary evil during the economic crisis that defined Mr. Obama’s first year. Interest in a long-term solution seems limited. Or, as Isabel V. Sawhill of the [|Brookings Institution] put it Monday on MSNBC, “The problem here is not honesty, but political will.”

Obama's Mixed Message
Megan McArdle,Atlantic Online, 29 Jan 2010 03:04 pm I think [|Bruce Bartlett] is right that Obama hasn't done a particularly compelling job of crafting a narrative akin to the Reagan or FDR lines: they broke it, I'm going to fix it. The three major components of the deficit worth talking about are, I think, the Bush tax cuts, the Medicare prescription drug benefit, and the stimulus and bailout measures that passed under Bush. Here's the problem with Obama laying out, clearly adn specifically, why these things were a bad idea: Reagan's greatest advantage may have been that he came out of the California governorship, not the Senate, and that his party did not control either house of Congress right before he entered office. This gave him tremendous leeway to explain how everything was the fault of that tired old Democratic ideology.
 * He intends to continue the majority of the deficit-busting tax cuts, or at least, campaigned on doing so
 * He is not going to say publicly that it was a bad idea to give seniors an expensive (and popular) new benefit
 * The various financial crisis boondoggles were passed by a Democratic congress which included one Barack Obama. He cannot complain about them without indicting himself and his colleagues.

[|Quote For The Day]
Andrew Sullivan, The Daily Dish, Atlantic Online, 04 Feb 2010 01:45 pm

"These figures highlight a massive failure of leadership from both Republicans and Democrats among the nation's political elite. Given the amount of political chatter about the budget in recent years, it is almost beyond comprehension that neither party has seen fit to highlight the basics so that the American people can make reasoned choices on the fundamental issues before them," - [|Scott Rasmussen.] He's absolutely right. The fundamental question in this country right now is how to get our fiscal house in order. When Democrats and Republicans refuse to be honest about the real choices in front of us, when they fail to educate the American people about the brutal reality ahead, they are guilty of professional negligence. If Republicans want to balance the budget by spending cuts alone, then they have a clear responsibility to say what they intend to cut in Medicare, defense, and social security, and how. If Democrats want to balance the budget by tax hikes alone, then they need to walk the walk as well, and tell us which taxes and how much. My view is that the obvious - //obvious// - sensible solution is to do a bit of both and argue reasonably about the balance. But we need to do so now.

Partisan Economics in Action
By [|DAVID LEONHARDT,]Washington Post, October 7, 2009, Economic Scene ...When I asked [|Dale Jorgenson], the eminent expert on productivity (and a Republican), what had been the positive aspects of President [|George W. Bush]’s economic policy, Mr. Jorgenson said, “I don’t see any redeeming features, unfortunately.” After Republicans opposed the [|stimulus package] this year, The Financial Times, not exactly a liberal organ, [|called] the party’s ideology harebrained. When Olympia Snowe was recently explaining why she might be the only Republican senator to vote for health reform, she [|suggested] it was because her party had moved so far to the right. But perhaps the most persistent — and thought-provoking — conservative critic of the party has been [|Bruce Bartlett]. Mr. Bartlett has worked for [|Jack Kemp] and Presidents Reagan and [|George H. W. Bush]. He has been a fellow at the [|Cato Institute] and the [|Heritage Foundation]. He wants the [|estate tax] to be reduced, and he thinks that [|President Obama] should not have taken on health reform or [|climate change] this year. Above all, however, he thinks that the Republican Party no longer has a credible economic policy. It continues to advocate tax cuts even though the recent Bush tax cuts led to only mediocre economic growth and huge deficits. (Numbers from the [|Congressional Budget Office] [|show that] Mr. Bush’s policies are responsible for far more of the projected deficits than Mr. Obama’s.) On the spending side, Republican leaders criticize Mr. Obama, yet offer no serious spending cuts of their own. Indeed, when the White House has proposed cuts — to parts of [|Medicare], to an outdated fighter jet program and to subsidies for banks and agribusiness — most Republicans have opposed them. How, Mr. Bartlett asks, is this conservative? How is it in keeping with a party that once prided itself on fiscal responsibility — the party of President [|Dwight Eisenhower] (who [|refused to cut taxes] because the budget wasn’t balanced) or of the first President Bush (whose tax increase helped create the 1990s surpluses)? “So much of what passes for conservatism today is just pure partisan opposition,” Mr. Bartlett says. “It’s not conservative at all.”... Modern conservatism, Mr. Bartlett says, should therefore have two main economic principles. One, it should prevent government from getting too big. There is no better opportunity than health reform, given that the current bills [|don’t do nearly enough] to [|slow spending growth]. Instead of pushing the White House to do better, however, Congressional Republicans are [|criticizing] any effort to slow spending as an attack on Grandma. They’re evidently in favor of big Medicare, just not the taxes to pay for it. The second goal should be to keep taxes from being increased in the wrong ways. Supply-side economics is based on the idea that higher tax rates discourage work and investment, two crucial ingredients for economic growth. But higher taxes on consumption don’t have nearly the same effect as taxes on incomes or companies. If anything, consumption taxes encourage savings, which lifts investment. So Mr. Bartlett advocates a value-added tax — a federal sales tax — which most other rich countries [|have]. Canada has a value-added tax that raises revenue equal to 2 percent of its G.D.P., and its economy [|has grown faster] than this country’s over the last decade. Britain raises 6 percent of its G.D.P. through such a tax and Sweden raises 9 percent, and their economies have grown as fast as the American economy. ...At some point, the government will have to figure out how to pay for the baby boomers’ retirement. “Trends that can’t continue,” as Mr. Bartlett says, “don’t.”

America’s Sea of Red Ink Was Years in the Making
By [|DAVID LEONHARDT] The New York Times, June 10, 2009, Economic Scene There are two basic truths about the enormous deficits that the federal government will run in the coming years. The first is that [|President Obama]’s agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying. The second is that Mr. Obama does not have a realistic plan for eliminating the deficit, despite what his advisers have suggested... The New York Times analyzed [|Congressional Budget Office] reports going back almost a decade, with the aim of understanding how the federal government came to be far deeper in debt than it has been since the years just after World War II... The story of today’s deficits starts in January 2001, as President [|Bill Clinton] was leaving office. The Congressional Budget Office [|estimated] then that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years. You can think of that roughly $2 trillion swing as coming from four broad categories: the business cycle, President [|George W. Bush]’s policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama. The first category — the business cycle — accounts for 37 percent of the $2 trillion swing. It’s a reflection of the fact that both the 2001 [|recession] and the current one reduced tax revenue, required more spending on safety-net programs and changed economists’ assumptions about how much in taxes the government would collect in future years. About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the [|Medicare] prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt. Mr. Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies — together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama — account for 20 percent of the swing. About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas. If the analysis is extended further into the future, well beyond 2012, the Obama agenda accounts for only a slightly higher share of the projected deficits...

=[|Why The Stimulus Is Too Small]= digg   Huffpost -   stumble   reddit   del.ico.us Ryan Grim February 9, 2009 12:23 AM There's a hurricane coming. Meteorologists aren't sure what category it will be but know it will be the worst in generations. There's a warehouse full of sandbags. What do you do? Some folks in town are arguing that using the entire warehouse would be wasteful and leave the next generation without any sandbags. Half the sandbags might be enough to stop the surging waters, they argue. Then again, half might not be enough. "Use them all," suggests economist James Galbraith. "If it turns out that you've used too many, then you've got extra sandbags. Big deal. If you use too few, they're all destroyed." Yet as the economic hurricane hits, President Obama and the U.S. Congress - driven by centrist senators from both parties - have decided to leave a few sandbags in the shed, hoping the waters won't rise too high. "We're in a very serious situation," Obama's economic adviser, Lawrence Summers, told ABC News' "This Week." "This is worse than any time since the Second World War. It's worse than, I think, most economists like me ever thought we would see." Democrats, including President Obama, have referenced the CBO modeling by making the claim that there is a gap of one trillion dollars between actual economic production and potential economic production. If that's the case, then it would seem that the stimulus should be enough to turn things around. "They're taking the word of technicians who are running a model that has no financial sector in it," repeats Galbraith, noting that during the Great Depression "the collapse of the banking sector was critical to the collapse and lack of resilience in the economy." There was no economic modeling being done in the 1920s or 1930s, however. Not even Galbraith, however, is absolutely certain that he and others who are similarly sour on the size of the stimulus are correct. We live in an uncertain world, as Robert Rubin likes to say. But think of it [| like Pascal's Wager.] Blaise Pascal famously argued that you might as well believe in God because if you're wrong, all you've done is waste a few Sundays. If you wager there's no God and you're wrong, well, God help you. In the same way, if the government follows the Galbraithian advice to go big and spends everything it can to turn the economy around and it goes too far, the worst thing you get is some inflation - which can be pulled back with interest rate hikes - and a higher national debt. (The Senate version raises the debt ceiling to $13 trillion.)

But what if they're right? There are more ways to harm children and grandchildren than saddling them with debt, such as, say, leaving them with a drastically lowered standard of living and an unstable world. Of course, the stimulus number isn't driven by economics, but by politics, despite occasional attempts to assert otherwise. "I think it will be below 800 [billion dollars]," said Nebraska Sen. Ben Nelson, the most vocal Democrat calling for a trimmed down stimulus. "For me it's not symbolism, it's an economic matter. At some point it's just too big."

That façade, however, stood erect for about five seconds. Asked by the Huffington Post if that meant he thought 800 billion, from an economic standpoint, was the specific point at which it was too big, he smiled and said, "It's whatever gets 60 votes, 61 votes." Politics being the art of the possible, Democrats shaved money from what was already a small stimulus in order to get Nelson's and Republicans' votes in the Senate. The GOP was able to control the messaging and the media focused on spending projects that Republicans ridiculed. Only when Nelson and his fellow centrist began proposing cuts to popular programs did Democrats retake control....

=[|An Alternative Stimulus Plan]=

By MICHAEL J. BOSKIN Wall Street Journal, NOVEMBER 17, 2009, 7:42 P.M. ET
While the economy has finally started to grow, the disturbingly high unemployment rate is increasing pressure from the left to double down on this year's poorly designed fiscal stimulus bill. Since the stimulus bill was signed, the ranks of the unemployed have grown by over three million (over four million if involuntary part-time and discouraged workers are included). The unemployment rate, which the Obama administration projected the stimulus would contain at 8%, is now 10.2%. There is little likelihood that another round of similar fiscal stimulus would yield much more than the paltry return on the first one. The original transfer payments and tax rebates barely nudged consumer spending, and the federal spending has been painfully slow. The delayed infrastructure spending—the shovels are still in the shed—will have a bigger impact, though less than claimed. Some of the funds to state and local government did reduce layoffs. The stimulus bill surely ranks dead last compared to the natural dynamics of the business cycle, the Fed's zero interest rate policy, and the automatic stabilizers in the tax code (which have reduced taxes proportionally more than income) as far as explanations for the improvement in the economy. But to evaluate the stimulus properly we should consider not just what we got for the $787 billion cost but the effects of alternative policies that might have been enacted. My Stanford colleague Pete Klenow and Rochester economist Mark Bils estimated that cutting the payroll tax by six percentage points (of the 12.4% Social Security component) would, under standard assumptions, increase employment by three million to four million workers—an amount equal to all the job losses since the stimulus was passed. The payroll tax cut would have reduced firms' costs by roughly the same amount as from the entire decline in employment. It would have cost less than half as much as the stimulus bill, gotten far more income into paychecks quickly and, most importantly, greatly reduced incentives for firms to lay off workers. In fact, it would have created incentives to hire. Even using the administration's claims of one million jobs "created or saved," the stimulus program passed in early February is millions of jobs short of what a cheaper payroll tax suspension would have delivered (see nearby chart). Yet the president and Congress are preparing vast new taxes on employment in the health-care reform and other legislation. Raising the federal top tax rate to 45% (from the current 35% with a 5.4% surcharge plus the expiration of the Bush tax cuts) will hit successful small businesses especially hard. The tax hike on capital gains and dividends hidden in the fine print of the health-care legislation will also raise the cost of equity capital, further weakening businesses (including banks) desperate for private capital. Many firms will also face either an 8% additional payroll tax or be forced to pay a higher share of health insurance premiums. Such tax increases will hit employment and wages hard. It would be far better to junk part of the remaining stimulus in favor of a one-year partial payroll tax cut. Also accelerate spending that needs to be done eventually, such as replenishing depleted military equipment used up in Iraq and Afghanistan and adding a desperately needed two Army brigades. There are five large interrelated headwinds to jobs and growth. First, continued deleveraging, unresolved toxic assets, and weak banks are constraining credit, especially for small business that is the source of most hiring. Second, household balance sheets depressed from declines in home values and portfolios are likely to constrain consumption growth. Third, government industrial-policy micromanagement with subsidies and mandates from pay to products is forcing noncommercial decisions on wide swaths of the economy from financial services and autos to energy and health care. Such policies have never worked before—ask the Japanese, Koreans and Europeans. Fourth, the explosion of spending, deficits and debt foreshadows even higher prospective taxes on work, saving, investment and employment. That not only will damage our economic future but is harming jobs and growth now. Fifth, the massive liquidity injections by the Fed raise the specter of future inflation. By far the best response to these headwinds is to curtail the huge current and contemplated future government control of the economy with a clear, predictable exit strategy—before the programs become permanently entrenched, develop powerful dependent constituencies, and greatly increase the risk of rising interest rates, inflation and taxation. Doing so would more rapidly improve the outlook for permanent private-sector employment, investment and growth than any conceivable second stimulus. It would also allocate capital and labor to their highest value in providing goods and services that people actually want and need, not what government bureaucrats want them to have. The jobs agenda must begin with a Hippocratic oath: First do no harm to employment. That means jettisoning or at least delaying job-killing energy and health-care legislation with their mandates, taxes and costs that especially hammer small businesses. Also wind down, as soon as possible, the emergency measures which healthy businesses, households and investors fear will become permanent competitive impediments. Start with the Troubled Asset Relief Program, which the Treasury uses as a permanent revolving fund even for nonfinancial bailouts. Financial regulation should focus on disclosure, transparency, effective clearing, capital adequacy, and new bankruptcy procedures. We also need a Plan B, modeled on the Resolution Trust Corporation cleanup of the savings and loans, in the event the losses on toxic assets are too large for time, profitability and economic recovery to manage. And the Fed must forestall future inflation by withdrawing its immense liquidity injections as soon and predictably as feasible (its initial steps are commendable). Finally, if possible, we should complement these pro-employment policies with long-run fiscal reform: control entitlement cost growth, e.g. with price rather than wage indexing of Social Security, and real tax reform with the widest possible tax bases and lowest possible rates. America's corporate tax rate, the second highest among advanced economies, is especially damaging. That is a far more consistent common-sense recipe for more and better jobs, far sooner than the current contradictory and ineffective policy mess emanating from Washington.
 * Mr. Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. He chaired the Council of Economic Advisers under President George H.W. Bush.**

[|ABC Can’t Find Economists Who Think the Stimulus Failed]
by Matthew Yglesias, Think Progress, Feb 18th, 2010 at 5:31 pm A funny thing seems to have happened [|on the way to a he-said, she-said story] for ABC on the stimulus:

“It played a significant role supporting recovery,” said economist Diane Swonk of Mesirow Financial. Not all the economists who responded to our survey agreed the stimulus was necessary. “The economy would probably be recovering,” argued Jay Bryson of Wells Fargo, **just maybe not “as fast as it is.”**
 * “The stimulus worked,”** said Stuart Hoffman, chief economist at PNC Bank. Without it, “the unemployment rate would probably be closer to 11 percent” and the economy might not have grown at all last year.
 * Mark Zandi of Moody’s Economy.com thought the nation would be “still in recession.”**
 * “Throwing a trillion dollars at anything will move it,”** said Standard and Poor’s David Wyss, “but the recovery would be beginning and the unemployment rate nearing a peak” without it.

They’ve attempted to frame this as a standard piece of “experts disagree on shape of the earth” shoddy policy journalism, but what you’re actually seeing here is that despite their best efforts they can’t find anyone to endorse the standard [|Heritage/NRO/GOP view] that the stimulus is harming the economy. Hoffman and Zandi deem the stimulus vital. Swonk says it played a “significant role” in bolstering recovery. Wyss is sniffy and derisive, but the essence of his sniffy derision is to say that //of course// the stimulus helped. And Bryson says the economy recovered faster because of the stimulus. Everyone agrees!

=[|Judging Stimulus by Job Data Reveals Success]= By [|DAVID LEONHARDT, Economic Scene, New York TImes, February 17, 2010] WASHINGTON Imagine if, one year ago, Congress had passed a stimulus bill that really worked. Let’s say this bill had started spending money within a matter of weeks and had rapidly helped the economy. Let’s also imagine it was large enough to have had a huge impact on jobs — employing something like two million people who would otherwise be unemployed right now. If that had happened, what would the economy look like today? Well, it would look almost exactly as it does now. Because those nice descriptions of the stimulus that I just gave aren’t hypothetical. They are descriptions of the actual bill. Just look at the outside evaluations of the stimulus. Perhaps the best-known economic research firms are IHS Global Insight, Macroeconomic Advisers and [|Moody’s] Economy.com. They all estimate that the bill has added 1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs. The [|Congressional Budget Office], an independent agency, considers these estimates to be conservative. Yet I’m guessing you don’t think of the stimulus bill as a big success. You’ve read columns (by me, for example) complaining that it should have spent money more quickly. Or you’ve heard about the phantom ZIP code scandal: the fact that a government Web site mistakenly reported money being spent in nonexistent ZIP codes. And many of the criticisms are valid. The program has had its flaws. But the attention they have received is wildly disproportionate to their importance. To hark back to another big government program, it’s almost as if the lasting image of the lunar space program was Apollo 6, an unmanned 1968 mission that had engine problems, and not Apollo 11, the moon landing. The reasons for the stimulus’s [|middling] [|popularity] aren’t a mystery. The unemployment rate remains near 10 percent, and many families are struggling. Saying that things could have been even worse doesn’t exactly inspire. Liberals don’t like the stimulus because they wish it were bigger. Republicans don’t like it because it’s a Democratic program. The Obama administration hurt the bill’s popularity by making [|too rosy an economic forecast] upon taking office. Moreover, the introduction of the most visible parts of the program — spending on roads, buildings and the like — has been a bit sluggish. Aid to states, unemployment benefits and some tax provisions have been more successful and account for far more of the bill. But their successes are not obvious. Even if the conventional wisdom is understandable, however, it has consequences. Because the economy is still a long way from being healthy, members of Congress are now debating another, smaller stimulus bill. (They’re calling it a “jobs bill,” seeing stimulus as a dirty word.) The logical thing to do would be to examine what worked and what didn’t in last year’s bill. But that’s not what is happening. Instead, the debate is largely disconnected from the huge stimulus experiment we just ran. Why? As Senator [|Scott Brown] of Massachusetts, the newest member of Congress, [|said], in a nice summary of the misperceptions, the stimulus might have saved some jobs, but it “didn’t create one new job.” • The case against the stimulus revolves around the idea that the economy would be no worse off without it. As a Wall Street Journal [|opinion piece] put it last year, “The resilience of the private sector following the fall 2008 panic — not the fiscal stimulus program — deserves the lion’s share of the credit for the impressive growth improvement.” In a touch of unintended irony, two of article’s three authors were listed as working at a research institution named for [|Herbert Hoover]. Of course, no one can be certain about what would have happened in an alternate universe without a $787 billion stimulus. But there are two main reasons to think the hard-core skeptics are misguided — above and beyond those complicated, independent economic analyses. The first is the basic narrative that the data offer. Pick just about any area of the economy and you come across the stimulus bill’s footprints. In the early months of last year, spending by state and local governments was falling rapidly, as was tax revenue. In the spring, tax revenue continued to drop, yet spending jumped — during the very time when state and local officials were finding out roughly how much stimulus money they would be receiving. This is the money that has kept teachers, police officers, health care workers and firefighters employed. Then there is corporate spending. It surged in the final months of last year. [|Mark Zandi] of Economy.com (who has advised the McCain campaign and Congressional Democrats) says that the Dec. 31 expiration of a tax credit for corporate investment, which was part of the stimulus, is a big reason. The story isn’t quite as clear-cut with consumer spending, as skeptics note. Its sharp plunge stopped before [|President Obama] signed the stimulus into law exactly one year ago. But the billions of dollars in tax cuts, food stamps and jobless benefits in the stimulus have still made a difference. Since February, aggregate wages and salaries have fallen, while consumer spending has risen. The difference between the two — some $100 billion — has essentially come from [|stimulus checks]. The second argument in the bill’s favor is the history of financial crises. They have wreaked terrible damage on economies. Indeed, the damage tended to be even worse than what we have suffered. Around the world over the last century, the typical [|financial crisis] caused the jobless rate to rise for almost five years, according to [|work] by the economists Carmen Reinhart and Kenneth Rogoff. On that timeline, our rate would still be rising in early 2012. Even that may be optimistic, given that the recent crisis was so bad. As [|Ben Bernanke], Henry Paulson (Republicans both) and many others [|warned] in 2008, this [|recession] had the potential to become a depression. Yet the jobless rate is now expected to begin falling consistently by the end of this year. For that, the stimulus package, flaws and all, deserves a big heaping of credit. “It prevented things from getting much worse than they otherwise would have been,” [|Nariman Behravesh], Global Insight’s chief economist, says. “I think everyone would have to acknowledge that’s a good thing.” So what now? The last year has shown — just as economists have long said — that aid to states and cities may be the single most effective form of stimulus. Unlike road- or bridge-building, it can happen in a matter of weeks. And unlike tax cuts, state and local aid never languishes in a household’s savings account. The ideal follow-up stimulus would start with that aid. It would then add on extended jobless benefits, which also tend to be spent, as well as tax credits carefully drafted to get businesses to hire and households to spend, like the cash-for-clunkers program. By this yardstick, [|the $154 billion bill] that the House passed in December is decent. It includes $27 billion in state and local aid, $79 billion for jobless benefits and other safety nets, and $48 billion in infrastructure spending. The smaller bills [|being considered] by the Senate are worse. They may end up with no state aid at all, and their tax credits sound better — with promises to help the long-term unemployed and small businesses — than they are. “The economic impact of the Senate bill, at this point, is starting to look very small,” Mr. Behravesh says. Given what people have been saying about a successful stimulus bill, just imagine what they’ll say about one that doesn’t accomplish much. E-mail: leonhardt@nytimes.com