First, there is a strong political motivation to make this recession out to be worse than it actually is. The Obama administration wanted to make it appear as though it saved us from an incipient disaster, so it overstated its achievements. The White House also wanted to foist its huge “stimulus” program on the country in order to redistribute income. That pleased many Democrats, but did very little to restore growth.
Many others repeated the administration’s hyperbolic claims. One reason is because there is genuine uncertainty about what has happened and what is likely to come. Short-term forecasts have major errors, and extrapolation of current data adds to misinformation. Then there are economists who would like to see government take a larger role in the economy. They’ve chosen to use the recession as a pretext for arguing for this change…
In their response to the recession, Congress and the administration were more interested in redistributing income than encouraging growth. They also ignored the lessons of the successful Kennedy and Reagan reductions in marginal tax rates. They added to their mistakes by enacting a temporary tax reduction as a main element of the $787 billion stimulus. Don’t they know that Presidents Ford, Carter and Bush failed to stimulate spending with temporary tax reductions?
A sensible administration would revise its policy. It should start by scrapping what remains of the stimulus.