(CNSNews.com) – Jared Bernstein, former chief economist and economic adviser to Vice President Joe Biden, said there should have been more economic stimulus spending beyond its current total of $833 billion to revive the economy and help job growth. The stimulus -- the American Recovery and Reinvestment Act -- went into effect in February 2009.
At George Washington University on Tuesday, Bernstein joined former Sen. Alan Simpson (R-Wyo.) to discuss the election year and the fiscal problems facing the country.
When asked about the U.S. government currently adding $2.5 million to the federal deficit every minute, Bernstein said he was “not worried” about the deficit now. (The deficit for 2012 is projected to be $1.2 trillion. In 2009, the deficit was $1.4 trillion; in 2010, $1.3 trillion and another $1.3 trillion in 2011.)
“The fact that the deficit as a share of GDP got so high in the recession was actually a very important thing to have done in order to offset temporarily the very large, negative economic effects of the great recession, the housing bust and all the loss of wealth,” he said. “The problem that we face is much less than any of those numbers, in my humble opinion. The problem that we face is, going forward, we are on an unsustainable budget path.”
According to the National Bureau of Economic Research, the last “recession” started in December 2007 and ended in June 2009. The economy today is in an expansion, however small with unemployment also still above 8 percent.
Frank Sesno, a professor at GWU and head of “Face the Facts USA,” a school-run project that sponsored the event, asked Bernstein, “So you’re not worried about this deficit, you’re only worried about this over time?”
“Correct,” Bernstein said. “I’m worried about over time because this deficit was necessary. In fact, there are those who argue, and I’d be one of them, that the question these days should be, was the deficit actually high enough in a temporary sense to offset— ”
“In other words, there should be more stimulus?” Sesno said.
“There should have been more deficit spending, more stimulus?” Sesno asked.
“Yeah,” Bernstein said. “And the key -- but the key point there Frank, is, because I don’t want to get Alan mad at me -- but the key point there is that when it’s temporary spending in the context of stimulus, when it’s temporary, that doesn’t hurt your medium-or long-term budget deficit at all. The things that get into the system and out of the system don’t hurt you -- it’s the ones that stay in there unpaid for.”
“And that’s the problem we have today,” he said.
Simpson retorted that Bernstein is among the “Krugman’s of the world” for championing more stimulus spending, in reference to the New York Times columnist.
“Well, what the hell do you think a $1 trillion $100 deficit is?” Simpson said. “That’s a stimulus. You borrowed it all. Every penny that came in last year to the United States, every cent, every penny, income, excise, everything, went only to three things: Medicare, Medicaid, and Social Security.”
“How long does anyone think that kind of thing can exist?” he said.
Bernstein was the co-author of the January 2009 report, The Job Impact of the American Recovery and Reinvestment Plan, which projected that the unemployment rate would never rise above 8 percent if the stimulus were adopted.
The stimulus passed and became law in February 2009, and the unemployment rate has yet to fall below 8 percent, peaking at 10 percent in October 2009. The current rate stands at 8.3 percent.
Bernstein previously defended his 2009 projections due to inaccurate data, contending, “Everyone was wrong.” Today, he says the unemployment rate would be at 10 percent had it not been for the Recovery Act.
“We’d be talking about 10 percent unemployment, instead of 8 right now,” Bernstein told CNSNews.com. “And that’s widely agreed upon by lots of outside analysts.”