ABC's Gibson stated that "a lot of people" say spending in recovery bill isn't "stimulus" -- but CBO director says "most economists" disagree

››› ››› JEREMY SCHULMAN

Interviewing President Obama, ABC's Charles Gibson repeated assertions that "not enough" of the economic recovery package before Congress "is really stimulative," that the bill "really doesn't stimulate," and that "it's a spending bill and not a stimulus." But according to the director of the Congressional Budget Office, "most economists" believe "all of the increase in government spending" included in the bill "provides some stimulative effect." The CBO director has further stated that the bill "would provide massive fiscal stimulus."

During his February 3 interview with President Obama, ABC World News anchor Charles Gibson repeated assertions that "not enough" of the economic recovery package before Congress "is really stimulative," that the bill "really doesn't stimulate," and that "it's a spending bill and not a stimulus." Gibson made no mention of the fact that these assertions -- which he attributed variously to "some people," "a lot of people in the public," and "a lot of members of Congress" -- have been challenged by economists, including Congressional Budget Office director Douglas Elmendorf, who has stated in congressional testimony that the bill "would provide massive fiscal stimulus" and that the CBO, along with "most economists," believes that all of the of the spending in the bill "provides some stimulative effect."

During the ABC interview, Obama stated that the recovery package "balances the need for speed ... and the need for us to make sure that some of this money is going to long-term investments that will make us more competitive." Echoing Republican claims that that spending provisions in the bill do not constitute economic stimulus and that the bill itself is therefore not a stimulus bill, Gibson responded:

GIBSON: Which leads some people to say that you tried to do too much with this bill too soon, and not enough of it is really stimulative. And as you know, there's a lot of people in the public, a lot of members of Congress who think this is pork-stuffed and that it really doesn't stimulate. A lot of people have said it's a spending bill and not a stimulus.

In fact, in analyzing the House version of the bill, H.R. 1, and the proposed Senate version, the CBO stated that it expects both measures to "have a noticeable impact on economic growth and employment in the next few years." Additionally, as Media Matters for America documented, in his January 27 testimony before the House Budget Committee, Elmendorf said that H.R. 1 would "provide massive fiscal stimulus that includes a combination of government spending increases and revenue reductions." Elmendorf further stated: "In CBO's judgment, H.R. 1 would provide a substantial boost to economic activity over the next several years relative to what would occur without any legislation."

During his January 27 testimony, Elmendorf also explicitly refuted the suggestion that some of the spending provisions in the bill would not have a stimulative effect, stating: "[I]n our estimation -- and I think the estimation of most economists -- all of the increase in government spending and all of the reduction in tax revenue provides some stimulative effect. People are put to work, receive income, spend that on something else. That puts somebody else to work."

From Elmendorf's testimony (accessed from the Nexis database):

REP. ROBERT ADERHOLT (R-AL): Just one thing that many of us have noted, that out of the $500 billion in the spending plan that has been proposed, only about $30 billion will be for highways. And a lot of -- much of the rest of that amount will be for various government programs, in ways that appear, at least on face value, do not have a stimulative effect, such as maybe the $50 million for the National Endowment of the Arts. How much of the $500 billion would you say will actually stimulate the growth and create jobs in the economy?

ELMENDORF: So in our estimation -- and I think the estimation of most economists -- all of the increase in government spending and all of the reduction in tax revenue provides some stimulative effect. People are put to work, receive income, spend that on something else. That puts somebody else to work. And for short-term purposes, what really matters most is how many extra dollars get spent, and that's why Keynes used this imaginary story about putting money in mines and paying people to dig it up, just the act of getting purchasing power into the economy.

Now, over time, putting money in mines and digging it up does nothing for our consumption possibilities or the future growth of the economy. So spending the money on something else presumably makes much more sense. But in terms of the direct effect, it is either the spending or the taxes in a variety of categories, and the differences amount to how quickly it happens and to the bang for the buck. But nothing really has a bang for the buck of zero.

ADERHOLT: So what percentage of that -- but you would say that the -- out of the $500 billion, would you say actually would stimulate the economy, in your opinion?

ELMENDORF: So I think all of the $800 billion provides some stimulative effect. The extent of stimulus varies by category, but it all matters, all of it.

Commenting on media repeating claims that spending in the bill is not stimulus, economist and Center for Economic and Policy Research co-director Dean Baker wrote on February 3:

Spending that is not stimulus is like cash that is not money. Spending is stimulus, spending is stimulus. Any spending will generate jobs. It is that simple. There is a question of whether the spending will go to areas that will provide benefits, long-term or short-term, to the economy, but there is no question that money that is spent will create jobs and therefore is stimulus.

Any reporter who does not understand this fact has no business reporting on the economy.

From the February 3 broadcast of ABC's World News:

GIBSON: So I asked the president if his proposal might be too ambitious:

You said from the get-go that you wanted a very big stimulus package, and you wanted it quickly. And so within days, an 800-plus-billion-dollar bill was written.

OBAMA: Right.

GIBSON: Did haste make waste?

OBAMA: No, I actually think that if you look at the package that came about of the House, we focus on making sure that in addition to creating jobs, we're laying the foundation for long-term economic growth. So we invest in infrastructure, around new green jobs and energy -- making sure that we are weatherizing homes to save on our energy bills long-term, making sure that we are investing in our healthcare IT systems, so that we can reduce cost and improve quality and reduce medical errors. So those are all sound investments that need to be made, and I think that the package that has been put together is one that balances the need for speed -- we've got to get this money out quickly in order to put people back to work -- and the need for us to make sure that some of this money is going to long-term investments that will make us more competitive.

GIBSON: Which leads some people to say that you tried to do too much with this bill too soon, and not enough of it is really stimulative. And as you know, there's a lot of people in the public, a lot of members of Congress who think this is pork-stuffed and that it really doesn't stimulate. A lot of people have said it's a spending bill and not a stimulus.

OBAMA: Charlie, if you take a look at the bill, the fact is there are no earmarks in this bill, which, by the way, some of the critics can't claim for legislation they've voted for over the last eight years. But here's the thing that I think we have to understand -- the economy is in desperate straits. What I won't do is adopt the same economic theories that helped land us in the worst economy since the Great Depression. But I want to be absolutely clear here: The overwhelming bulk of the package is sound, is designed to put people back to work, help states that are in desperate straits, help families who are losing jobs and healthcare, and is designed to make sure that we've got green energy jobs for the future. In fact, most of the programs that have been criticized as part of this package amount to less than 1 percent of the overall package, and it makes for good copy, but here's the thing -- we can't afford to play the usual politics at a time when the American economy continues to worsen.

GIBSON: There are "buy American" provisions in this bill. A lot of people think that could set off a trade war, cost American jobs. Do you want them out?

Posted In
Economy
Person
Charlie Gibson
Show/Publication
ABC World News Tonight
We've changed our commenting system to Disqus.
Instructions for signing up and claiming your comment history are located here.
Updated rules for commenting are here.