With ugly economic news raining down on us like a monsoon, I think it is important to ask if the stimulus helped. Was it worth it?
First the badness:
Sales of newly built homes dropped to their lowest level since the government started tracking the numbers more than four decades ago, with demand for home purchases down in all four regions of the country.
The Commerce Department reported Wednesday that new homes sold in July at an annual rate of 276,000, down 12.4 percent from June and down 32.4 percent compared with the same time last year.
First, I would like to say what everyone knows. The housing sector was overbuilt. There are too many houses that are sitting empty now. New houses are not going to sell with so many old houses sitting idle. Loans for new houses are going to be harder to get and this isn’t necessarily a bad thing. The housing sector is not going to be our economic engine in the next decade. It can’t be.
Unfortunately, it is hard to cheer up a man who is watching his house burn by reminding him that at least he has your health. The Stimulus has saved millions of jobs. The American auto industry is selling cars again. Mark Zandi, chief economist for The Economist, stated:
Former McCain economic adviser, and longtime stimulus defender, Mark Zandi took issue today with House Minority Leader John Boehner’s criticisms of President Obama’s economic policies, and with multiple GOP calls for Obama’s top economic advisers to resign.
“I think we’d be in a measurably worse place if not for the stimulus,” Zandi said at the Christian Science Monitor breakfast this morning. “If we had not had the stimulus…we’d have fewer jobs today than we actually have.”
Zandi was responding to Boehner’s contention yesterday that stimulus spending “has gotten us nowhere.” Asked whether he agreed with Boehner, Zandi said “no.”
“Without the stimulus spending,” Zandi insisted, “instead of a 9.5 percent unemployment rate, we’d have an 11.5 percent unemployment rate.”
In addressing questions about the size of the stimulus he stated:
“I would have made it larger,” Zandi said. “I think we underestimated — significantly underestimated — the severity of the situation that we were in and still are in. And that that would have argued for a larger stimulus package.”