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Shortly after taking office President Obama got a stimulus package costing $787 billion through Congress. It created quite a bit of debt that has to be paid back by future tax payers, but the administration argued that the money would jump start the economy and get us out of the slump quicker. This, and the jobs it would create, would make it worthwhile. The obvious question is: is it working?

We are about half a year after the bill was passed. The economy is looking better, and an increasing amount of data is coming in. John Cogan, John Taylor and Volker Wieland have looked into it and their early answer is no.

So let’s look at the data on the contributions of government spending and other components of GDP to the 5.4 percentage-point improvement. By far the largest positive contributor to the improvement was investment–which went from minus 9% to minus 3.2%, an improvement of 5.8% and more than enough to explain the improved GDP growth. Investment by private business firms in plant, equipment and inventories, rather than residential investment, were the major contributors to the investment improvement. In contrast, consumption was a negative contributor to the change in GDP growth, because consumption growth declined following the passage of the stimulus package.

It’s still early on, but it’s always interesting to have a look at actual data. Overall, journalists ought to be better at evaluating the outcomes of public policies, rather than focusing on the intentions. As you well know, good intentions often lead to bad outcomes and it is the latter that we have to live with.

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