When good policies look bad

Two stories came out today that deserve to be thought of as one -- and that get to the root of the Obama administration's most frustrating problem.

First, Jackie Calmes reports on TARP, which is set to expire Sunday. Ask your average voter how much the bailout cost, and they'll probably tell you $700 billion. Wrong. It now looks like taxpayers are going to lose either very little or nothing -- and there's a good chance they'll actually make some money. Sen. Bob Bennett, the Utah Republican who lost his primary in large part because he voted for the bill, has the best take. “My career is over,” he told Calmes, “but I do hope that we can get the word out that TARP, number one, did save the world from a financial meltdown and, number two, did so in a manner that, I believe, won’t cost the taxpayer anything.”

Second, Lori Montgomery reports on various assessments, including a White House report, showing that the stimulus spent its money at about the speed it promised, generating -- at least according to the CBO -- about the numbers of jobs it promised, and did so with remarkably little waste, fraud and abuse. "Certainly, the fraud and waste element has been smaller than I think anything anybody anticipated," said Steve Ellis, vice president of Taxpayers for Common Sense, a nonpartisan watchdog group. "You can certainly challenge some projects as questionable economically. But there haven't been the examples of outright fraud where the money is essentially lining somebody's pocket."

Of course, the comments will inevitably fill up with people saying that unemployment is at 9.6 percent, and the administration predicted it would be beneath 8 percent, and so the stimulus failed. This is essentially the same as saying that if I eat an apple, and the apple doesn't fill me up, the apple has failed. Just as you can be hungrier than your meal is big, a recession can be larger than the stimulus designed to confront it. And ours was.

For all that Republicans are dismissing the CBO's estimates on the stimulus, you can bet that they'd be perfectly happy to trumpet those same estimates if they were suggesting the stimulus failed. They're also saying that an economy in recession needs continued low taxes, which is a form of stimulus (tax cuts, of course, made up about a third of the stimulus bill). And as far as concerns over debt go, extending the Bush tax cuts will add about five times as much to the deficit as the stimulus did. So that's not a consistent objection, either.

Now, you can argue that there were better ways to do the stimulus. That's almost certain. Here, for instance, is some evidence that the attempt to use behavioral economics research to design better tax cuts didn't work. You can say the stimulus was too small. That's quite clear. But the unemployment rate is not a verdict on the stimulus. It's the unemployment rate in the absence of the stimulus that we need to think about. I'm open to an argument over where the stimulus, at this point, has created 700,000 jobs rather than 2.5 million. But the argument that's taken hold in the political discourse, where Sen. Mitch McConnell says that “by any measurable index, the stimulus package has been a failure," and then brags about stimulus projects in his back yard, is just politics.

That has consequences. Both the TARP and the stimulus appear to have done their jobs quite well. TARP probably averted a depression, and the stimulus gave the economy a big shot of demand when it was most needed, and has created millions of jobs. Given the chaos and confusion that reigned amidst the financial crisis, that's pretty good. But because the economy is still in terrible shape -- in part due to the stimulus's size, though I'm not sure that Democrats would be much more popular if a large stimulus had brought unemployment down to 8.2 percent -- both the stimulus and the bailout have been politically, if not substantively, discredited.

That's not only bad as a matter of politics, as politicians who did the right thing, like Bennett, are being turned out of office, but it's bad as a matter of policy, as it'll make it harder for future leaders to follow and expand on an apparently successful template. Discrediting good policies now increases the likelihood of bad policies later.

Photo credit: Justin Sullivan Photo. Graph credit: David Leonhardt/New York Times