Demand-Side Policy Gave Us the Big Economic Fizzle

Nearly five years since the recession ended in June 2009, economic policy discussions continue to focus on dubious short-term countercyclical measures to “stimulate demand.” The Economic Report of the President for 2014 wastes an entire chapter rehashing the jobs supposedly “saved or created” by the 2009 fiscal stimulus and Federal Reserve easing. That analysis relies on notoriously inaccurate forecasting models to take credit for the entirely prosaic facts that (1) the last recession eventually ended just as all previous recessions did, and that (2) employment subsequently rose a bit.