Where I mix career information and career decision making in a test tube and see what happens

Wednesday, October 29, 2014

Revisiting My Predictions for the President’s Stimulus Plan

These days, it’s easy to forget the excitement that many people felt when President Obama was inaugurated. Many businesses attempted to capitalize on this historic moment by issuing commemorative merchandise, such as plates and tee-shirts bearing Barack Obama’s image. It was also a time of recession, and many people were wondering what relief they could expect from the incoming president’s promised stimulus plan. As a result, the editors at JIST Publishing thought this would be a good time for me to write a book that eventually was called Great Jobs in the President’s Stimulus Plan and that had a cover photo showing President Obama looking thoughtfully into the distance.

Now, almost six years later, I thought it would be a good time to revisit what I wrote in that book and to see how well the passage of time has borne out my predictions. So, for the 100 occupations I featured in the book, I am now looking at the BLS data regarding their workforce sizes in 2008 and 2012. Did these occupations actually increase in size over this period of economic recovery?

I regret to say that the occupations actually shrank in workforce size, by an average of 4.7 percent. However, I must point out the workforce size of all occupations shrank by almost the same amount: by 3.7 percent.

Where did I—and the economy—go wrong? First, I may have chosen some wrong occupations because at the time I wrote the book, a few days before the inauguration, the stimulus plan existed only in outline form. It had not been presented to Congress, let alone held to a vote. I made my best guesses about which occupations were likely to benefit, based on the industries that were targeted in the proposed legislation.

More important, the American Recovery and Reinvestment Act itself may have been insufficient to boost the economy, not to mention the specific occupations I focused on. This is the argument of Paul Krugman and some other economists. At the time the ARRA passed, he wrote, “Officially, the administration insists that the plan is adequate to the economy’s need. But few economists agree. And it’s widely believed that political considerations led to a plan that was weaker and contains more tax cuts than it should have—that Mr. Obama compromised in advance in the hope of gaining broad bipartisan support.” More recently (February 20 of this year), Krugman is conceding that “most careful studies have found evidence of strong positive effects on employment and output.” He contrasts our economy to that of the Eurozone, where nations that were forced to impose fiscal austerity—the opposite of stimulus—have fallen into double-dip recessions. Nevertheless, although the ARRA arrested the economy’s downward slide, saving many jobs, it did not create new jobs sufficiently to overcome the losses of the recession within a few years. As Krugman expresses it, “The U.S. economy continued to perform poorly—not disastrously, but poorly—after the stimulus went into effect.”

It is also worth asking whether 2012 is too soon to evaluate the success of the ARRA. Some economic effects take years to appear—for example, the results of funding for scientific research and for vocational training and other kinds of education. Also, some stimulus spending took years to be disbursed, so any results would not have been visible in 2012. A noteworthy example is health information technology, now one of our fastest-growing industries. Stimulus funding for health IT was not disbursed until 2011. It’s true that only 2 percent of expenditures remained to be awarded at the end of 2012, but for the Department of Energy, 15 percent of allocated funding had still not been awarded at that time.

I conclude that my recommendations in that book were not as misguided as they might appear at first. Economic stimulus measures and individual workers’ careers both require many years to bear fruit.

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