Josh Bivens of EPI digs into today’s second quarter GDP report to try and figure out what effect the stimulus package has had:
Federal government spending grew at an 11% rate in the quarter, adding roughly 0.8% to overall GDP. State and local government spending grew at a 2.4% annual rate, the fastest growth since the middle of 2007. It is clear that the large amount of state aid contained in the ARRA made this growth possible.
Furthermore, real (inflation-adjusted) disposable personal income rose by 3.2% in the quarter, after rising by only 1% in the previous quarter. A large contribution to this increase was made by the Making Work Pay tax credit passed in conjunction with the ARRA.
….The consensus of macroeconomic forecasters is that ARRA contributed roughly 3% to annualized growth rates in the second quarter. This means that absent its effects, economic performance would have resembled that of the previous three quarters, when the economy contracted at an average annual rate of 4.9%.
The argument that the stimulus bill has “failed” because times are still tough has always been dimwitted. There was never any chance that it was going to miraculously end the recession, only that it might make it a little shallower than it otherwise would have been. So far, it appears to have done exactly that.