Claims That Stimulus Is Working Are “Groundless”

Conn Carroll / August 19, 2009

On August 6, Christina Romer, the chairman of the President’s Council of Economic Advisers, gave a talk entitled “So, Is It Working? An Assessment of the American Recovery and Reinvestment Act at the Five-Month Mark.” United States Court of Appeals for the Seventh Circuit judge Richard Posner has posted a response a The Atlantic, reading in part:

Let me make clear at the outset that I support the stimulus, though I wish it had been better designed. … Romer argues in her talk that by the end of the second quarter of this year, $100 billion of stimulus money had been spent. That is a suspiciously round number, and it is unclear how it was arrived at; but let us assume it is accurate. She then argues that this small expenditure–about two-thirds of one percent of the Gross Domestic Product–is responsible for the fact that the decline in GDP fell (on an annualized basis) from 6.2 percent in the first quarter of the year to 1 percent in the second quarter (though the latter figure is likely to be readjusted upwards).

This assertion is groundless. No one has the faintest idea what effect the (more…)