• Latest News
  • Pitch a Story
  • Work with a Journalist
  • Join the Blog Squad
  • Afghanistan
  • Africa
  • Asia
  • Baltimore
  • Canada
  • Egypt
  • Europe
  • Latin America
  • Middle East
  • Russia
  • Economy
  • Environment
  • Health Care
  • Military
  • Occupy
  • Organize This
  • Reality Asserts Itself
  • US Politics
  • Did Obama Stimulus Work?

    Bob Pollin Pt5: The stimulus plan saved many jobs and helped prevent a deeper crash, but was far short of spurring a recovery -   August 22, 2012
    Members don't see ads. If you are a member, and you're seeing this appeal, click here


      Share to Twitter
    Share to Facebook

    You are an inspiration. Thanks for everything you are doing. - Brenton
    Log in and tell us why you support TRNN


    Robert Pollin is Professor of Economics at the University of Massachusetts in Amherst. He is the founding co-Director of the Political Economy Research Institute (PERI). His research centers on macroeconomics, conditions for low-wage workers in the US and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the US. His latest book is Back to Full Employment. Other books include: A Measure of Fairness: the Economics of Living Wages and Minimum Wages in the United States, and Contours of Descent: US Economic Fractures and the Landscape of Global Austerity.


    Did Obama Stimulus Work?PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.

    We're continuing our discussion about Bob Pollin's new book, Back to Full Employment. And now joining us again from Amherst, Massachusetts, is Bob Pollin, where he is the cofounder and codirector of the PERI institute. Thanks for joining us, Bob.


    JAY: So, once again, watch the other parts of the interview, 'cause you really should get the unfolding of the logic here. But we're just going to pick up from where we left off. So we're talking now about what are solutions, especially to the pressures of globalization. And in the last segment we talked how significant it is that employers in the United States and Canada, and Europe to a large extent, can threaten workers with these pools of cheap labor and millions and millions of unemployed people all over the world, but many of whom can now produce at a very advanced level. And that pressure has led to stagnation of wages in the United States and Canada, and Europe, I believe, and in spite of higher productivity. And now we're going to talk about, well, then, what do you do about this. This is quite objective, this ability of capitalists to do this. We discounted in the last part the effectiveness of trade protectionism and lowering U.S. currency rates. And now we're going to talk about, well, then, what can we do. And then you get to, well, first of all, stimulate the U.S. economy. And the big attempt at doing that was President Obama's stimulus program. So, Bob, take us through that program, because the critique is it didn't really work.

    POLLIN: The 2009 Obama administration stimulus program, the so-called American Recovery and Reinvestment Act, was an $800 billion government program over two years to inject spending into the economy. There are lots of debates as to whether the program was too big, too small. The point is that in absolute dollars it was huge. It was bigger than any stimulus program we've had, certainly since World War II, in absolute dollars.

    That doesn't mean it was big enough, because the magnitude of the crisis was also massive, also unprecedented. So if you measure this $800 billion, $400 billion over two years, relative to the magnitude of the crisis, it turns out that it wasn't big enough. It did accomplish things. It did counteract the decline of the private economy due to the Wall Street collapse. But it was not enough to revive the economy back onto a path even close to full employment.

    Let me just give two examples as to why that was true. One of the factors in the collapse, the Wall Street collapse, was the decline of household wealth. So you actually had household wealth between 2008 and 2009 decline by about $17 trillion—$17 trillion. That's more than 10 percent of U.S. GDP. So it was about—$70 trillion was the total level of household wealth before the crisis, and then after the crisis it's down to $53 trillion. Now, when people experience that much decline in their wealth, the decline in the value of their homes, largely, the value of their other assets, whatever stocks, bonds, pension funds they're holding, then they spend less.

    And if we follow some of the economic research on this, what we would expect with that level of a collapse is that you would reduce household spending by about $500 billion right there. So more than half of the money that the stimulus is kind of injecting into the economy is getting withdrawn at the same time due to the collapse of household wealth. So that's one reason why the stimulus was too small.

    Another was: while the federal government was injecting this $800 billion over two years into the economy, state and local governments were facing a huge collapse of their finances. So the money was—some money was going to state and local governments to keep them propped up in terms of their spending, but that was only partially compensating for the loss of funds that the states had. For example, our own institution here, UMass Amherst, I was on the budget committee of UMass Amherst, and we faced a huge crisis and the prospects of major layoffs. We got a stimulus check of $50 million. That meant that we could stop the layoffs, but it didn't mean we could add more jobs. So the stimulus program again was just covering in part the hole that was created by the state and local government financial crisis there.

    So for those reasons and a few others similar to that, the stimulus was not enough to compensate for this massive Wall Street collapse.

    JAY: So I think then some people would argue or ask the question: then why wasn't it made bigger? And some people have argued, actually, if you actually take the size of what was getting out of the economy, it should have been at least even double in size. But is perhaps one of the reasons it wasn't bigger is because if you take out this Keynesian toolkit, the banking and business elite, they understand at times when the economy's about to melt down you can take out some of these Keynesian tools, you can have a certain amount of stimulus, but they don't want enough to actually do what you're hoping it would do, which would actually significantly change employment rates, because that would shift sort of a balance of power back to workers, they would start to gain some leverage, wages would start to go up, so, you know, those who now have, you know, control of public policy at the federal level and state level, majority, they'll only do this stimulus just enough to stop a meltdown, and then they go right back to, okay, relatively high unemployment ain't so bad for us?

    POLLIN: I think you may be giving them a little too much credit in terms of their ability to know how big the stimulus should have been. I don't doubt your overall perspective. I don't doubt that there are a lot of people, politicians, certainly virtually all Republicans and a high portion of Democrats, that do not want a high-pressure, high-employment economy through which workers have growing bargaining power. I don't disagree with you on that at all.

    On the issue of how big the stimulus needed to be at the moment, it was actually hard to know it. And I confess I myself underestimated the magnitude of how big the stimulus should be. I mean, I wrote an article in The Nation right after Obama got elected, and I sketched out a level for the stimulus which wasn't all that different than the one that got enacted, and I didn't have the motives that you are—.

    JAY: Yeah, Bob, I understand that, but within the first two years of the administration, when the Democrats still controlled both houses, a year, a year and a half in, one then could have said, okay, it wasn't big enough, there should be another one, and you and a lot of others were saying that, but we sure didn't get that.

    POLLIN: Sure. The other part of the story, which is also in my book, is the other side, which is monetary policy, the role of the Federal Reserve in mobilizing the credit system. And here we also have this massive blockade, which you and I have talked about many times but deserves to be talked about—especially, the Fed is meeting just today to talk about some new policy measures they might pursue. The point is that monetary policy looks like it's highly, highly, highly stimulative, 'cause they've dropped the interest rate that banks have to pay to get money, to get liquidity down to zero percent. They get money for free. But that is not working in terms of stimulating activity in the economy, because the banks take the money and are sitting on it and are hoarding it. So they're now sitting on $1.6 trillion—again, 10 percent of GDP. So the idea that we have a stimulative monetary policy is not true inasmuch as the money is not getting out into the economy.

    JAY: And just—we've talked about this before, but let's do this again, too. And it's not that they're just sitting on it, too. They're also making money out of it (they're just not loaning it into the productive economy) in terms of carry trades, where they, you know, pick up money on foreign currency exchanges, or even still derivatives plays.

    POLLIN: Well, yes, they're doing all of those things, Paul. But I'm even talking about an even simpler thing. They're holding this money in cash accounts at the Fed, $1.6 trillion. They're also doing the things that—the other things that you're talking about, speculating in derivatives, in carry trade. They are doing those things. The only thing they're not doing is lending money to small businesses to get them going, so that if we don't have a government stimulus, a public-sector spending stimulus to, for example, keep public schools growing, to hire teachers, to hire bus drivers, to hire cafeteria workers, for example, to hire firefighters, if we don't have that coming and at the same time we don't have money coming through the private credit system to the small businesses, that's why the economy's stuck.

    JAY: And does there not also be, if there's going to be this kind of stimulus instrument used, that it's targeted and it's big enough to really have an effect on workers' ability to demand higher wages? Otherwise, don't you just have a period of time where the stimulus has an effect and then it starts to peter out, but you're right back to the same situation, which is there isn't enough real demand in the economy and you're back into paralysis again?

    POLLIN: That is exactly why I try to stress so much full employment as the goal and also say full employment is not just about a statistic with the number of people who have jobs. Pushing the unemployment rate down, say, in the range of below 4 percent, will empower workers. And, yes, capitalists will resist it. But it will also bring demand into the economy, and that, businesses are going to find, is going to be good. They're going to find that people have more money to spend. And that will allow them to invest more and expand their businesses. And that's exactly why the small businesses in particular would benefit tremendously by a successful stimulus program.

    JAY: And, again, that's if you had a political regime, a government that actually had as an objective full employment, 'cause right now these guys are actually quite happy selling into the emerging markets and actually don't seem that concerned—these guys being the business elite—don't seem to be that concerned that the American market isn't as robust as it could be, 'cause they can make their money through cheap wages in the U.S. and also just the global market.

    POLLIN: Well, except the global market isn't doing very well either. I mean, Europe is a basket case. Europe is worse than the U.S. So at a certain point we have to have some serious interest in stimulus. I mean, we do have—if you read The Financial Times, The New York Times, The Wall Street Journal today, you have a lot of talk about the meetings that are going on at the Federal Reserve and the European Central Bank, and these elite newspaper outlets are encouraging a stimulus through the central banks, except nobody talks about what the stimulus actually is, what the techniques are, how to do it, how to do it effectively. And so they're stymied, and that in all probability this round of central bank meetings aren't going to be any more successful than all the previous ones.

    JAY: Right. And as I pointed out when I did my commentary on the G20 documents in Toronto, there's a five-letter word that never gets talked about in any of these meetings, and that is wages. And the idea that wages need to go up as part of a solution you don't hear within the business pages, unless they're talking about China. Then all of a sudden, yeah, the wages should go up.

    POLLIN: That's true.

    JAY: Okay. Well, in the next part of our series of interviews with Bob Pollin we're going to kind of wrap up what should be done and talk a little bit more about the politics of all this. So please join us for our summation segment of Bob's new book Back to Full Employment on The Real News Network.


    DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


    Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at


    Latest Stories

    The Modern History of Venezuela and Popular Democracy - Edgardo Lander on RAI (9/9)
    An Asia "Pivot" Should Mean Cooperating with China to Solve the Global Environmental Crisis
    Assessing the U.S. Environmental Movement
    Intimidation and Political Interference Goes Unpunished in UAW Case
    Exclusive Investigation Uncovers How BP Uses Bribes To Do Business
    The Modern History of Venezuela, The Protests and Democracy - Edgardo Lander on RAI (8/9)
    Greek Politics 4 Years After The Financial Crisis
    CBO Report Confirms U.S. Deficit Back to Normal Level
    Israel Uses Refugees as "Currency" in Arms Trade with Africa
    Who Will Pay for Climate Change Disaster?
    Canada Shifts to Right Under Harper, Mimicking the United States
    The Savings and Loan Crisis Demonstrates the Importance of Glass-Steagall
    South African Platinum Miner's Struggle Challenges ANC Leadership
    TRNN Original Report: Manning Determined to Fight Back After Army Upholds 35- Year Sentence
    Hundredth Anniversary of the Ludlow Massacre
    The Bundy Ranch Standoff Demonstrates Values Shared by Corporations and the Far Right
    The Resegregation of American Schools
    The Modern History of Venezuela, Why Still So Much Crime? - Edgardo Lander on Reality Asserts Itself (7/9)
    What Role Has Russia Played in Eastern Ukraine?
    Can Johns Hopkins Afford to Pay A Living Wage? (2/2)
    University Sit-In Targets World's Largest Private Coal Company
    The Modern History of Venezuela and the Need for a Post-Oil Economy - Edgardo Lander on RAI (6/9)
    Can Johns Hopkins Afford to Pay A Living Wage? (1/2)
    One Percent of Environmentalists Killings Lead to Convictions
    Investigation Finds Former Ukraine President Not Responsible For Sniper Attack on Protestors
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Ukraine Transitional Gov't Moves Militarily To Reclaim Seized Buildings
    IPCC Report Flawed By Narrow Focus on Carbon Emissions
    The Modern History of Venezuela: The Bolivarian Revolution - Edgardo Lander on Reality Asserts Itself (5/9)
    Obama Signs Directives to Reduce the Gender Wage Gap
    Eastern Ukraine Lacks Political Representation in Kiev
    Demystifying the Role of Mitigation in the Most Recent IPCC Report
    Hypersurveillance State Won't Prevent Another Boston Marathon Bombing
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Univ. of Maine Faculty Reinstated After Students Protest Against Cuts
    The Modern History of Venezuela from 1908 to 1973 - Edgardo Lander on Reality Asserts Itself (2/9)
    IMF Will Address Global Inequality, Says Managing Director Christine Lagarde
    Raising Big Banks' Leverage Ratio Good, But Not Nearly Enough
    TRNN Replay: Austerity Road to 19th Century
    Has Palestinian Maneuvering Revived Peace Talks?
    Late Jackson Mayor Lumumba's Son Wins Primary to Replace His Father, Runoff Election Ahead
    Quebecers Reject PQ and Elect a Liberal Government Representing Big Business
    TRNN Debate: Decriminalization vs. Legalization
    The Beginning of the Chavez Era - Edgardo Lander on Reality Asserts Itself (4/9)
    "Off With His Head": Court Upholds Obama's Power to Kill
    Workers at Nation's Top Hospital Strike For Fair Wages
    From Exile to Radicalization in Venezuela - Edgardo Lander on Reality Asserts Itself (1/9)
    Rwanda 20 Years Later: Genocide, Western Plunder of Congo, and President Kagame
    Ukrainian Protesters in the East Demand More Autonomy From Kiev Government
    Hunger Strikers Demand President Obama Halt His Record 2 Million Deportations
    Indian Parliamentary Elections - A Primer With Vijay Prashad
    West Looks to Carve Up Ukraine & Privatize Industries Held by Kleptocrats
    Where Are Israeli-Palestinian Peace Negotiations Headed?
    The Multiple Kingdoms of Saudi Arabia (5/5)
    Do the Afghan Presidential Elections Signify Progress?
    Republican Presidential Hopefuls Pay Homage to Billionaire Casino Tycoon Sheldon Adelson
    Will Extremist Lieberman Become Israel's Next Prime Minister?
    Why do the Saudis Want the US to Attack Iran? (4/5)
    Immigrant Advocates and Families Tell President Obama 'Not One More'
    Elections, Pipelines, and Protests - The Canada Panel
    Chris Hedges on "Israel's War on American Universities"
    Baltimore Residents Decry Lack of Affordable Housing
    Yellen Talks the Talk But Will She Walk the Walk?
    Hopkins Hospital Workers Speak Out against "Poverty Wages"
    Will Venezuela's New Floating Exchange Rate Curb Inflation?
    The European Central Bank's War on Wages is Pushing Europe's Economy to the Brink
    Supreme Court Decision Opens Floodgates for More Campaign Cash
    Charles Keating, the Financier Behind the Savings and Loan Scandal, Dies at 90
    Saudi Arabia and the al-Qaeda Monster (3/5)
    Maryland Residents Voice Opposition to Natural Gas Fracking Export Facility
    Supreme Court Ruling Gives Wealthy Individuals More Influence Over Elections
    What are the Saudis Afraid Of? - Madawi Al-Rasheed (2/5)
    Baltimore's MICA Adjunct Professors Set to Vote on Unionization
    Boycott of Israel Moving to Next Level?
    Hypocrisy Dressed Up as "Realism" Justifies American Alliance with Saudi Dictatorship
    Immigration Reform in the Shadows of Cesar Chavez's Legacy
    Leaked Senate Report Shows Use of Torture As "Ineffective"
    UN Report Says Climate Change Will Threaten Food Production Worldwide
    The Hypocrisy of US Calling for Enforcement of International Law
    How the Ecuadorian Economy Grew in a Global Recession
    'Shadows of Liberty' Trailer
    Kristina Borjesson on Why CBS Shut Down Her investigation into Flight 800 (2/8)
    Glen Ford on Racism in the American Media (3/8)
    Paul Jay on What Drives Corporate Media and What Drive The Real News (4/8)
    Creating a New Media Paradigm After Citizens United (5/8)
    Should The Left Engage with the Mainstream Media? (6/8)
    What Is the Financial Backing For The Real News? (7/8)
    Standing up to Character Assassination (8/8)
    Oligarchs, Fascists and the People's Protest in Ukraine
    TRNN Debate: Is Obamacare In the Interest of Workers?
    Too-Big-To-Fail Advantage Remains Intact For Big Banks
    Obama and the Saudi Agenda
    TRNN Replay: Investigating the Saudi Government's 9/11 Connection and the Path to Disilliusionment - Sen. Graham on Reality Asserts Itself pt 1
    The Iraq War's Real Legacy
    Petitions with 100,000+ Signatures Call for Snowden's Passport to be Reinstated
    We Need to Harness People Power - Andy Shallal on Reality Asserts Itself (4/4)
    BC Pipeline Fight and Quebec Elections - The Canada Panel
    Jonathan Schell - 1943-2014: Board Member of TRNN on Why We Need The Real News
    Teachers on Strike from the UK to Argentina
    Connecticut Poised to Become First State with $10.10 Minimum Wage
    Oil Spill Threatens Wildlife and Local Economy
    DC School Test Scores Up, But Poor Black Kids Are Doing Worse - Andy Shallal on RAI (3/4)
    Obama's Proposal To End NSA Bulk Data Collection Won't Protect Privacy
    How Google, Apple & The Biggest Tech Companies Colluded to Fix Workers' Wages
    An American Should be One that Questions Their Government - Andy Shallal on RAI (2/4)
    What's Driving Putin & Obama's Posturing on Ukraine?
    Hundreds of Students & Faculty Occupy College Campus to Fight Cuts to Public Higher Ed
    Due Process 'Impossible' In Harsh Death Sentencing Of Over 500 Muslim Brotherhood Members
    Has Anglo-American Capitalism Run Out of Steam?
    Being the "Other" in America - Andy Shallal on Reality Asserts Itself (1/4)
    TRNN Debate: Should Baltimore 'Ban The Box'?
    How Fallujah Became the Iraqi Government's New Battleground
    Why I Decided to Blow the Whistle on the NSA
    NASA Climate Predictions Show Serious Threat To Humanity
    Professor Who Teaches Israel-Palestine Conflict Accuses College of Violating His Academic Freedom
    CIA and NSA Wrongdoing Requires Independent Investigation, Says Former Church Committee Staff
    Are Tuition Breaks Enough To Combat High Student Debt And Low Graduation Rates?
    Industries Across the U.S. Are Stealing Wages From Their Lowest Paid Workers
    Who In Ukraine Will Benefit From An IMF Bailout?
    NSA Recording All International Calls From U.S.
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (2/2)
    BP Gets Green Light to Drill in Gulf, But Has Safety Improved?
    Residents Still Not Drinking Tap Water Two Months After West Virginia Spill (1/2)
    Libya's Descent Into Turmoil Three Years After NATO Intervention
    From Pipelines to Peladeau - Canadian Report
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (1/2)
    Congressional Progressive Caucus Budget Strikes Back Against Austerity
    Libya Three Years Later - Chaos and Partition
    Why Was Gaddafi Overthrown?
    Should Ukraine and West Accept De Facto Crimea Joining Russia? (2/2)
    Tony Benn Saw Socialism as the Culmination of Democratization
    Why Didn't Bush/Cheney Attack Iran and Can Obama Make and Sell a Deal? - Gareth Porter on Reality Asserts Itself (3/3)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi? (2/2)
    Crimea Referendum: Self Determination or Big Power Manipulation? (1/2)
    Sen. Graham: President Must Side with Openness About CIA and 9/11
    Manufacturing a Narrative for War - Gareth Porter on Reality Asserts Itself (2/3)
    Protesters Hit the Streets of Brooklyn to Demand $15 Minimum Wage
    Hammer: 'Moral Bankruptcy' Behind Massive GM Recall
    White House Withholds Thousands of Documents from Senate CIA Probe
    I Grew Up Believing in Time Magazine's Version of America - Gareth Porter on RAI (1/3)
    Western European Banks Vulnerable to Ukrainian Sovereign Debt Crisis
    TRNN Debate: What's Driving Inflation in Venezuela? (2/2)
    CIA vs. Senate: Who Is Obama Protecting?
    Will Tipped Workers Get Excluded Again From Minimum Wage Hike?
    TRNN Debate: What's Driving Inflation in Venezuela? (1/2)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi?(1/2)
    TRNN Replay: A Look at Who's Poised to Become No.2 at the Fed
    How Right-Wing Nationalism Rose to Influence in Ukraine (2/2)
    Netanyahu Attacks Boycott As Campaign Enters New Phase
    Moving Towards a Police State - Michael Ratner on Reality Asserts Itself (7/7)
    Fighting Reagan's Secret, Illegal Wars - Michael Ratner on Reality Asserts Itself (6/7)
    Puerto Rican Independence Movement and Cuba Further Radicalized Me - Michael Ratner on RAI (5/7)
    The Butcher of Attica - Michael Ratner on Reality Asserts Itself (4/7)
    MLK and a Radicalizing Moment in American History - Michael Ratner on Reality Asserts Itself (3/7), Real News Network, Real News, Real News For Real People, IWT are trademarks and service marks of IWT.TV inc. "The Real News" is the flagship show of IWT and Real News Network.

    All original content on this site is copyright of The Real News Network.  Click here for more

    Problems with this site? Please let us know

    Linux VPS Hosting by Star Dot Hosting