February 18, 2009, President Obama signs the Stimulus Bill, known as “The American Recovery and Reinvestment Act” into law. In all likelihood, that same day, an unknown opposition member begins writing the first accusation that the stimulus didn’t work.
Upon signing the bill, the President predicted that it would inject enough money in the economy to keep unemployment below eight percent, and that ‘shovel ready’ projects would provide direct hiring opportunities for people who had already lost jobs. These are the first two things critics of the bill seize upon when they declare the program an “abject failure.”
Failure, in this case, is a matter of nuance. Unemployment rocketed past eight percent almost immediately, and has remained there for 36 consecutive months, the longest amount of time in 60 years. And the ‘shovel ready’ projects the administration expected were fewer and less ready than advertised. The estimated two-year recovery is entering its fourth year.
Do these differences between expectation on the part of the administration and today’s reality constitute failure? If one looks only at the numbers that float to the top, it looks like it to some. To them, the administration’s estimates were promises, and those promises were broken. In fact, Obama’s stimulus is attacked for a litany of such ‘broken promises.’
If, however, the analysis is a comparison of where the economy was heading in January of 2009 to where it wound up three years after the stimulus, a different story emerges. According to the Congressional Budget Office, and several private economic analysts, comparing the loss of GDP with and without the stimulus shows a clear victory for the stimulus. The same is true for unemployment. However high it went, it would have gone significantly higher without the intervention of “The American Recovery and Reinvestment Act.”
The American economy was driving full-bore toward a cliff that would have put the economy into free-fall in the beginning of 2009. Almost immediately upon the enactment and signing of the stimulus, that began to change. The economy had been contracting at a rate of as much as 9 percent in the fourth quarter of 2008. By the end of the second quarter of 2009 the contraction had slowed to less than one percent, and turned positive soon afterwards. American industry was losing 750,000 jobs a month by the end of 2008, but has turned around to the point it is creating nearly 200,000 jobs a month… a million job swing.
So, did the stimulus work? Yes. Did it work as quickly or as aggressively as the administration estimated (promised?)? No. Does that make it a failure? No, but it makes it in part disappointing. Americans by the millions have lost jobs they’ll never see again, and their homes into the bargain. Entire segments of the economy, such as the American auto industry, nearly contracted to the point of vanishing, before the administration pumped $80 billion into them temporarily, saving not only the auto companies, but much of the supplier base upon which they depended. The industry is back, but not all the jobs, and much of the wage gains of the past half century has been lost.
The stimulus may not have worked exactly as advertised, but it DID work.
President Obama (Official Photo) source – Wikimedia commons