Dean Baker, co-director of the Center for Economic and Policy Research, said:
The Democrats have not benefited as much as they should because they have been scared to tell the true story of what is going on in the economy.
The reality is that the collapse of the housing bubble created a gap in annual demand of around $1.2 trillion. About half of this gap is due to a falloff of more than $600 billion in annual construction demand. This is the result of massive overbuilding of both housing and non-residential real estate. Annual consumption has also fallen by around $600 billion because, not because people are pessimistic, but rather because they lost $6 trillion in housing equity.
To replace this $1.2 plunge in annual demand, the Dems pushed through a stimulus that provided about $300 billion a year to the economy in both 2009 and 2010. Roughly half of this was offset by cutbacks at the state and local level. This left a net boost from the government sector about $150 billion to counter a drop of $1.2 trillion in private sector demand.
This stimulus was nowhere near large enough to boost the economy back to full employment as fans of arithmetic everywhere can quickly recognize. However, the Dems were too intimidated by the Peter Peterson-Washington Post types to so what is obviously true. Since the Dems couldn't speak the truth they were left saying nonsense, which has not sat well with voters.
The reality is that the unemployment rate is 1.0-2.0 percentage points lower than it would have been without the stimulus, but it is pretty hard to boast about a 9.6 percent unemployment rate. If the Dems could develop a backbone and stand up to the deficit hawk demagogues they might make more headway with the public, but that doesn't seem likely at this point.
Glen Reynolds of Instapundit said:
No, and they should be grateful. If Democrats were getting full credit for all they've done since 2008, they'd be losing over 100 seats.
October 25, 2010, 07:34 pm