There were two so-called "stimulus" programs. One under President BUSH. The Economic Stimulus Act of 2008, The law provides for tax rebates to low- and middle-income U.S. taxpayers, tax incentives to stimulate business investment, and an increase in the limits imposed on mortgages eligible for purchase by government-sponsored enterprises (e.g., Fannie Mae and Freddie Mac). The total cost of this bill was projected at $152 billion for 2008. The 2nd under President OBAMA — the American Recovery and Reinvestment Act of 2009 or ARRA. The approximate cost of the economic stimulus package was estimated to be $787 billion at the time of passage. The primary objective for ARRA was to save and create jobs almost immediately. Secondary objectives were to provide temporary relief programs for those most impacted by the recession and invest in infrastructure, education, health, and ‘green’ energy. The Act also included many items not directly related to economic recovery. Was it successful? Depends on whom you ask, of course. Conservatives will say unemployment is near double-digits and growth is slow, so clearly it didn’t work. Liberals will say yes, unemployment is too high but that’s just a sign the stimulus wasn’t big enough. It worked when you think about how much higher unemployment would have been without it. And, come to think of it, we need more stimulus. Each side can find facts and models to fit its worldview. See the debate below.

The Big Con

By Laurence Kotlikoff,
from Maudlin Economics,

Everyone knows what caused the Great Recession (GR). Bad banks issued bad mortgages. Bad bankers overleveraged. Bad shadow banks evaded regulators. Bad rating companies overrated securities. Bad regulators fell asleep at the wheel. Bad households drove up house prices. Bad derivatives expanded. Bad traders overtraded. In sum, bad banks full of bad bankers did bad things.There’s just one problem with this narrative. It doesn’t fit the facts. Worse, it diverts attention from the real problem. The real problem wasn’t bad actors misusing a good banking system. It was mostly good actors using a bad banking system—a banking system built to fail. Structural failures have structural causes. The Hindenburg had a short circuit. The Challenger had faulty O-rings. The Titanic had unsealed bulkheads. The I-35W Mississippi River Bridge had inadequate gusset plates. Our banking system had and has leverage and opacity. Thanks to these structural problems, the banking system failed colossally. Then it was bailed out and rebuilt to original spec. Consequently, it will collapse again. Leverage and opacity are the O-rings of the banking system.

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