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One primary cause of misunderstandings about the stimulus was what Obama's then chief of staff, Rahm Emanuel, called the "gift bag" of dismal economic indicators the President inherited from Bush. No stimulus could have produced a rapid turnaround from the financial meltdown, and there was no easy way to promote a jobs bill when jobs were vanishing. The U.S. economy shrank at an 8.9% annual rate in the fourth quarter of 2008. That's depression territory. After the President-elect's first meeting in December 2008 with his economic aides, who bluntly declared that the economy was falling off a cliff, top political aide David Axelrod told Obama he already knew three things: Their poll numbers weren't going to stay so high. All of the team's geniuses were going to start looking like idiots. And they were going to have a brutal midterm election. "We didn't create this problem," Axelrod warned, "but we'll be held accountable for it."
Politically, Obama had an even bigger problem in early 2009: Americans weren't yet feeling much pain. The financial earthquake had struck, but the economic tsunami had yet to reach shore. Larry Summers, then Obama's top economist, mused that FDR was lucky; the U.S. had suffered through three years of depression before he took office, so everyone knew it was Herbert Hoover's fault.
Obama took office with the economy in free fall, shedding 800,000 jobs that January. The stimulus passed in February, and the next quarter saw the biggest jobs improvement in 30 years. But way better than hideous was still bad, and the jobless rate, a so-called lagging indicator, kept rising toward double digits. Obama's economists also gifted his critics with a politically disastrous report predicting the stimulus would keep unemployment below 8%; it soared above 8% before the stimulus even kicked into gear, which clearly wasn't the fault of the stimulus, but nobody remembers that. The report was also cluttered with caveats, but nobody remembers that either.
Anyway, the Keynesian idea that the public sector needs to create demand by injecting cash into the economy during downturns is an inherently hard political sell when families and businesses are tightening their belts. White House political hands like then vice-presidential chief of staff Ron Klain recognized that after Bush's unpopular bank bailout, the public would be skeptical about throwing more borrowed cash at the problem. "This is going to be a tough thing to message," Klain warned Summers.
Summers shrugged. "We have to do what we have to do," he replied.