In short, the stimulus was supposed to jump-start the economy and therefore fix it. It didn't. It bailed water out of the boat for a while, but didn't plug the hole.
An excellent parallel of the stimulus story is the heralded "Cash for Clunkers" program. According to Edmunds, only 125,000 of the 690,000 purchases would not have been made without the incentives, and with $3 billion spent, that works out to $24,000 per car. Additionally, the price of used cars increased significantly due to the drop in supply, thereby impacting anyone (especially poor people) who needed to buy a used car. Moreover, With reference to carbon dioxide emitted in the process of making a new car, William Chameides of Duke University said that in order to offset the carbon footprint of the new car from a clunker, the average driver would need to drive the car about five and a half years; with trucks, the figure jumps to eight or nine years of typical driving. And to top this off, Harvard economics professor Edward Glaeser argues that subsidizing fuel-efficient vehicles encourages more driving, as the marginal cost per mile driven is less, which causes total fuel consumption to decrease less than expected.
Yet the Cash for clunkers program was considered successful, much in the same way Bernstein and the others behind the stimulus think it was successful.
While we are at it, let's do the math with Bernstein's numbers. At $800,000,000,000 for 2,500,000 jobs, that's $320,000 per job. Wow. Most of that slipped through the cracks because, as we know, the government has lots of huge cracks.
So, if Bernstein and the other stimulus crafters believe the stimulus did what it was supposed to do, that means they intended to spend 800B taxpayer dollars to provide temporary jobs for 2,500,000 people at a cost of $320,000 per job.
Instead of stating that the stimulus worked, Bernstein should have provided excuses for its failure. Had he insisted that the stimulus would have worked if it weren't for Obamacare, Dodd-Frank, job-killing green energy policies, etc., some people might have believed him. Not me, but what do I know? After all, my knowledge of these things is limited to what's obvious.
Blog: The stimulus worked?