Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

Nevertheless, it was substantial. In absolute terms it was on a par with the spending of the New Deal. Though it was smaller in relation to a much larger national economy, the Obama stimulus was concentrated over a shorter space of time.10 In 2009 it placed America alongside the Asian states in the league of activists, outstripping any discretionary fiscal measures taken in Europe. And it worked. Despite the protestations of “freshwater” free-market economists and the complex economic arguments directed against “naïve” Keynesian “pump priming,” every reputable econometric study found that the Obama stimulus had a substantial positive impact on the US economy.11 Estimates by Obama’s Council of Economic Advisers put the number of jobs created at 1.6 million per year for four years, for a total of 6 million job-years.12 The multiplier was positive and above 1. This implies that the effect of government spending on the economy was not just positive. More private economic activity was stimulated than the government originally contributed. So the impact of the government’s spending was to shrink the government’s share in overall economic activity. But if this was the case, if the stimulus worked, why didn’t the Obama administration ask for more?13 There were political risks in asking for a figure bigger than $1 trillion. But there were risks to undershooting as well. By 2010, America’s unemployment was still stuck above 10 percent. Foreclosures and forced sales were destroying e...