Jonathan Chait:
The Chart That Proves the Stimulus Was Never Tried: The federal government has been pumping economic stimulus, in the form of higher spending and lower taxes, into the economy since 2009. But state and local governments have been pumping stimulus back out of the economy. Why? Because state and local governments can't run deficits. They have to balance their budgets. When the economy slows down, those governments collect less taxes, and often they have to spend more (on, say, programs for the poor….
The Goldman Sachs chart here measures the effect of the federal government's stimulus against state and local governments' anti-stimulus. Guess what? Anti-stimulus has been winning since the middle of 2010….
This offers an appropriate context in which to understand Obama's jobs plan. As Goldman Sachs indicates, if Congress approves Obama's plan (prognosis: dead on arrival) it would mainly just create enough new stimulus from the federal government to slightly overcome the state and local anti-stimulus. The net effect of government fiscal policy on the economy would be neutral. It would be sort of like the Lend-Lease program to help Great Britain win the war, if we were already giving weapons to the Nazis. A big improvement, in other words, but not exactly an overwhelming response…
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