Somewhere in the Middle

Did it work?

by Paula Canup

On February 19, 2009, Congress passed the American Recovery and Reinvestment Act – a.k.a. the Stimulus Bill. Eighteen months later, many people, including myself, are asking, “Did it work?”

It certainly doesn’t feel like it. Unemployment remains at nearly 10%, the highest since 1983. The housing market took another hit as soon as the 8000k tax rebate expired. Many economists are predicting a double-dip recession, and a few even use the “D” word. President Obama made the mistake of predicting that unemployment would not rise above 8% if the stimulus bill passed. So it’s fair to say the plan failed to meet expectations.

But that’s just one way to look at it. It’s just as important to consider what would have happened if the stimulus had not passed. Many, perhaps most, economists believe the bill saved us from going over the cliff. If they are correct, then the stimulus succeeded in doing what it was intended to do. Obama’s problem is the impossibility of proving the negative – what didn’t happen. We can’t rewind history and try it without the stimulus.

The reality is, we will never know how well this plan succeeded. Economists still argue over whether Roosevelt’s New Deal worked to bring us out of  the Depression – decades later. The 2009 stimulus did save the jobs of many teachers and other state employees, at least temporarily. It also created new jobs, but how many? The estimates are all over the place, so it’s fair to say we don’t really know that either. Independent firms such as Moody’s have concluded that between 1.6 and 1.8 million jobs were either saved or created. The White House just released an estimate of 2.5 to 3.6 million jobs.

After much research, I’ve concluded that the stimulus did work to some degree, at least in the short run. But how effectively and efficiently did it address our economic problems, and how much effect will it have long-term? The idea of Congress doing anything efficiently is, perhaps, laughable. The sheer size of the bill, at 1,073 pages, suggests that a great deal of pork was included. It also means that almost none of the people who voted for it actually read it. They didn’t have time to read it even if they were inclined to do so. Since much deal-making went into getting it passed, it is likely that politics, not effectiveness, decided where much of the money would be spent.

Boosting the economy immediately may have been necessary. It may be that a bad stimulus bill was better than no stimulus at all. If it helped grow our economy, it could even lower future deficits by bringing in more tax revenue, but who knows if it will be enough to offset its cost. The looming entitlement problem is still there and will have to be addressed. So will that thirteen trillion dollar national debt.