Once again: Yes, the stimulus worked.

Amazingly, there are still some holdouts in the political and economic community who insist that the Obama stimulus failed--that is, failed to arrest a steep fall in economic output and launch a period of growth in gross domestic product, jobs, stock market valuations, and other metrics that continues to this day.

Menzie Chinn of the University of Wisconsin and Jeffrey Frankel of Harvard (and a former Clinton administration economics advisor) have just ganged up on the stimulus deniers. Their analyses are timely, since the stimulus has just passed its fifth birthday: The American Recovery and Reinvestment Act was signed into law on Feb. 17, 2009.

Chinn observes (and shows his work via a series of telling slides) that the launch of ARRA coincides almost exactly with the bottoming out of the stock market, the reversal of a trend of increasing negative GDP growth and an almost unbroken record of positive growth since the end of the first quarter of 2009.

“The burden of proof,” he writes, “lies on those who assert the beginning of the recovery is due to anything, anything (Fed balance sheet expansion, TARP — both implemented six months earlier –, sunspots, or the return of Ancient Aliens) but the policies implemented by the Obama Administration.”

He even cites a dyed-in-the-wool conservative Republican economist, Douglas Holtz-Eakin, as telling nay-sayers to get serious, already: “It’s pretty tough to throw a trillion dollars at the U.S. economy, and not do something, and so the whole notion that somehow this had no effect is badly misplaced,” Holtz-Eakin told an audience at the Natonal Assn. for Business Economics earlier this week.


Frankel chides his fellow economists for damning the stimulus with faint praise, explaining that it “wasn’t big enough,” or that the Great Recession would have been worse without it, or that it was unwisely cut short by Congress in 2010.

Such comments, Frankel observes, look like attempts to explain away the absence of a visible positive effect. Listening to these arguments, one would think that no effect of the Obama stimulus could be seen by the naked eye in the U.S. economic statistics of 2009. Nothing could be further from the truth.”

Rather, he shows, the effect on job figures, GDP and financial market indicators “could not have been much more immediate.” His chart on job growth is reproduced above.

As we enter year six of the stimulus era, with yet another disappointing reading on GDP, it’s important to keep all that in mind: The stimulus works, it should have been bigger, and the impulse to replace it with austerity measures has done nothing but hurt workers and businesses. Anyone who claims otherwise doesn’t know how to read an economic chart, or doesn’t want to.