In follow-up to an earlier post and on the eve of our two major political party conventions, I thought it would be good to provide some context on another big hairy audacious lie, the one that is in many commercials – that gosh darn “failed stimulus.” Let me begin with a question – what do Macroeconomics Advisors, Moody’s Economy.com, IHS Global Insight, JP Morgan Chase, Goldman Sachs and the Congressional Budget Office (CBO) have in common? They all agree that the Obama stimulus bill increased GDP by at least 2 percentage points. The stimulus bill saved the country from a second depression and per the above six economic forecasters, made the difference between contraction and growth saving creating over 2.5 million jobs.
In a very well written article on this subject by Michael Grunwald, a senior national correspondent at Time magazine, he notes the stimulus was much more effective than Obama was given credit for and it in fact,as time passes, will be viewed in much more favorable light. Grunwald does note the $787 million stimulus has been a political failure, in that the effort has been viewed negatively because it was not a panacea and the opposing party has shined a spotlight on this fact. Yet, from an economic standpoint it did much more than that.
Per Grunwald, “For starters, the (American Reinvestment and) Recovery Act was the biggest, most transformative energy bill in history, financing unprecedented government investments in cleaner coal, energy efficiency, advanced biofuels and the refineries to brew them, and factories to manufacture all that green stuff in the United States. The stimulus was also the biggest and most transformative education reform bill since the Great Society, shaking up public schools with a “Race to the Top” competition designed to reward innovation and punish mediocrity. It was a big and transformative health-care bill, too, laying the foundation for Obama’s even bigger and more transformative reforms a year later. It included America’s biggest foray into industrial policy since FDR, the biggest expansion of anti-poverty initiative since LBJ, the biggest middle class tax cut since Ronald Reagan, and the biggest infusion of research money ever.”
That does not sound like a failed stimulus to me. Could it have been better? Absolutely. Did it focus too much on some less worthy projects that were “shovel ready?” Yes. Did it fail? Per these six economic forecasters, no it did not. I mention the number six as on “Real Time with Bill Maher” on Friday night, a Romney advisor discredited the forecast when Maher rebutted his “failed stimulus” assertion. Maher correctly noted the stimulus package worked and that the use of “failed” was a campaign ploy. In politics, if you do not like the message, shoot the messenger. Yet, we are talking about six economic forecasters not one messenger, one of which is the CBO. The CBO is interesting in that they do their absolute darndest to be non-partisan in their projections. The only time their work comes into question is when one political party does not like their answer. Yet, when they do like their answer, the CBO is the greatest thing since slice bread.
I have said in earlier posts, one of the President’s key mis-steps has been not managing expectations. Housing based recessions on average take six years to run their course. That is based on a study of housing based recessions over time in multiple countries. On average, we should see the light at the end of the tunnel at the end of 2013. Yet, the impact of Europe’s crisis and China’s slowdown continue to dampen our recovery which has been a slow climb. So, it could be a little longer than the average. Pollsters ask the question are you better off than you were four years ago? Well, if they have any equity assets, the market is about 80% higher than it was back in October, 2008 when the banks mismanagement brought the house down on many. There are about 3 million jobs more than there were at the time of Obama’s first budget in October, 2009 and homes are beginning to sell better.
People tend to have short memories about when and how things transpired. We are not out of the woods and people are still hurting. We have to get more people back to work and keep them in their homes. Yet, over all the US is in a much better place than it was when the President took office on January, 2009 irrespective of what people say and believe. As an independent voter who votes for Republicans and Democrats, we need to give our imperfect President some kudos where they are deserved. There are many that did not agree with the GM and Chrysler bailouts, but both companies are with us today and hundreds of thousands of their and supplier jobs are still intact. There has been an increase in jobs, but more is needed.
What we need is for honest dialogue with the American people. We need Congress and the President to work together and discuss openly the real facts of the situation. I have provided my view of the Independent Voter’s Platform in an earlier post. It is not perfect, but at least it tries to ignore the political bullshit and the lobbyist and funders efforts to define our future. To be honest with you, I could care less what the GOP position is on abortion, birth control, gay rights, same-sex marriage, etc. We need to move beyond those issues because America has moved beyond those issues. I feel like we have some extreme parts of the GOP that are like acting like those in “The Crucible.” This is one of the reasons I left the GOP back in 2006. So, whether Romney or Obama carry the day, the President needs to focus on the economy, eco-energy and education more than anything.
So, when you hear the word “failed stimulus,” remember two things. First, very smart, non-partisan economists would beg to differ. Second, think of that woman on the commercial where her Ragu loses in a taste test to Prego and she wonders what other bad decisions she has made in her life? Maybe, just maybe what she has been told about global warming being a hoax is a lie. Maybe, just maybe what she has been told about being taxed enough already is a lie. And, maybe, just maybe what she has been told about reducing taxes on the top end will trickle down to her is a lie. Folks, we need the facts and we need collaborative solutions.
musingsofanoldfart 
We forget. Before the stimulus, the US economy was losing more than 750,000 jobs per month. It stopped the hemorrhaging before we lost the patient. It was a lot smaller than it could or should have been and one half of it came in the form of tax benefits. Republicans won’t concede its effectiveness because they won’t give an ideological inch on Keynesian Theory (which they reject) and would rather argue that giving tax cuts to the wealthy is the only proper method of stimulating economic recovery.
Dave, well said. The Keynesian ideas explain much of the huge advantage on jobs created under Democratic white houses than GOP ones. You would think the data would reveal the better path. Reagan also had good job growth, but it was primarily due to opening markets, a trait Bill Clinton followed. Outside of FDR, Clinton is best job creating President. Thanks for reading and offering your comments. BTG
Amen! Well said.
Thanks Hugh. I appreciate your support and comments.
The stimulus didn’t fail, at the same time it did not go far enough in some respects.
Agreed on both counts. One of the thing I left out was the historians, per the article in Time, will look back on the stimulus in a very positive way.