In a speech delivered on Sept. 24 at the Federal Reserve Bank of Chicago, "Back From the Brink," Cristina Romer, chairwoman of the White House's Council of Economic Advisers, makes the best case possible for defending the Obama administration's efforts to combat the recession.
And not just the Obama administration -- Bernanke's Fed, and Paulson's Treasury also come in for praise. In Romer's view, the shocks that hit the U.S. economy last year were as strong or even stronger than the shocks that precipitated the Great Depression. The difference between now and then: The government and the Fed did not make the same ghastly policy mistakes this time around. Forceful fiscal and monetary action pulled us "back from the brink."
Romer singled out the stimulus for praise, and added a nice dig at some of the administration's most vociferous critics. (Italics mine)
Using two very different estimation methods, the CEA found that the fiscal stimulus has raised real GDP growth by roughly 2 to 3 percentage points in both the second and third quarters. We estimated that as of August, it had raised employment relative to what otherwise would have occurred by approximately one million. We also showed that our estimates were very much in line with those of a broad range of private forecasters and the Congressional Budget Office. There is a widespread consensus (except perhaps on the op-ed page of the Wall Street Journal) that this aspect of the policy response has been highly effective at alleviating the real decline and counteracting the effects of the financial crisis.
Perhaps Romer was referring to "The Stimulus Didn't Work," a WSJ Op-Ed piece by two Hoover Institution conservative economists published Sept. 17. Or perhaps she was looking ahead to Oct. 1's "Stimulus Spending Doesn't Work" by Robert Barro, a Harvard economist who is also a Hoover fellow, and Charles Redlick, described as "a recent Harvard graduate." In either case, her rhetorical parry was deft -- you know exactly what you're going to get from the WSJ Op-Ed page (not to mention the Hoover Institute), which makes them very easy to ridicule, or ignore.
Time's Justin Fox chose the ridicule route, in his post "A headline-writing primer for the WSJ's op-ed editor."
His proposed headline:
Our Macro Model Says the Stimulus Won't Have Much Positive Impact, Robert Barro's Model Says It Will Have a Negative Impact, and the Obama Administration's Model Says It Will Have a Big Positive Impact. While There's Not Even Remotely Enough Information Available Yet to Tell Who's Right, We've Taken a Couple of Isolated Data Points Out of Context and Spun Them to Support Our Case
With minor adjustments, that headline could work for 90 percent of what passes for economic opinionizing on the editorial pages of the world's financial press. It's a keeper!