Stimulus Cost/Benefit Still Unclear

I have written many times on this page about my belief that the stimulus packages instituted by the U.S. government in the wake of the financial crisis were unwise. I have historically had two main reasons for taking this position. One is what I suppose is a quasi-economic, quasi-political belief that the country shouldn't be printing money that is backed by debt held by nations who tend to be on again/off again friends. I also just didn't think that stimulus was worth the cost in dollar terms separate of any value judgments.

While I think I am on to something, I cannot be 100% sure I am right that printing money to create demand is ineffective for an economy in the long-run; Paul Krugman and others have pointed out recently that countries in Europe that have cut back rather than spend have fared poorly. If Krugman et al. are someday proven right (and the odds favor Princeton profs over me if I am being honest), then I am obviously wrong. If that were the case, I would be happy to jump the austerity ship to support any proven method of reviving the moribund economy.

That said, I am not sure that one theory or other will ever be proven right or wrong (kind of an ongoing problem plaguing the field of economics). Over the short-run, Keynesians will declare victory if things get better and will continue to claim that stimulus plans were actually too small if America continues to struggle. Conversely, the austerity crowd will claim the title if budget cuts lead to an upswing in the economy, but could argue that a lack of depth to cuts will obfuscate analysis if their standard bearer takes the White House this fall and the economy continues to sag. And of course in the long-run, we will all be dead.

All differences aside, even those who aren't 'intellectually bankrupt Austerions' might pause if the cost of the American Reinvestment and Recovery Act were between $540,000 and $4.1 million per job. Those are the very numbers I recently saw publicized by the National Republican Congressional Committee. Now, the name alone might indicate to readers that the numbers I quoted are about as unbiased as a team's cheering section at a football game. However, they were based on data from a Congressional Budget Office report, and those numbers should be relatively bias-free.

Those numbers are higher than estimates I have seen (and made) in the past. And some readers might believe that saving any job is worth the costs. However, I believe that most Americans, the vast majority of whom have household incomes far below even the lowest estimates of cost per job I have seen, will be unhappy with that use of tax dollars. Whether or not things would have been worse without that spending might be something we can never say for sure, but the numbers - still - just don't add up for me.