Right-wing media don't want to stimulate the economy
Research ››› ››› JULIE MILLICAN, CHRISTINE SCHWEN & JUSTIN BERRIER
Since President Obama took office, right-wing media figures have opposed every major package proposed to stimulate the economy, despite support from a consensus of economists and economic analysts. Recent opposition has included Obama's newly proposed infrastructure plan, the extension of unemployment insurance, aid to states, and food stamps, all of which have been shown to stimulate the economy.
Conservatives oppose the infrastructure plan
Drudge: "Obama Addicted to Stimulus" On September 6, Matt Drudge declared that in proposing the infrastructure plan, Obama was "addicted to stimulus" :
Doocy links infrastructure project to original "porkulus." On September 7, Fox News' Fox & Friends co-host Steve Doocy said the plan would be a second stimulus, "much like the so-called 'porkulus,' $787 billion."
Opposing the "son of stimulus," Doocy said that "White House need a plan B." Later during that program, Doocy said that "it seems like this White House needs a plan B, but they keep going back to plan A" with "this son of stimulus."
Varney: "It is a stimulus plan for the unions." Fox & Friends also hosted Stu Varney to attack the infrastructure program, which he claimed was a "stimulus plan for the unions." He later falsely suggested that the stimulus didn't work, claiming: "It's all about government spending, take it from this group, give it to that group, and it hasn't worked."
Morrissey: Obama's jobs plan is the "same failed and expensive Keynesianism that he tried in February 2009." In a September 6 Hot Air post, right-wing blogger Ed Morrissey falsely claimed that the stimulus bill of 2009 was a "failed policy" while discussing Obama's new jobs proposal:
What happens when over a hundred billion dollars in borrowed cash gets plunged into infrastructure spending and it fails to kick-start the economy? According to this administration, spend another $50 billion on the same failed policy. Barack Obama will unveil his new economic stimulus plan in Wisconsin today, while Russ Feingold looks for a place to hide:
In this election cycle, pork may be all Democrats can use as an argument for re-election. They certainly larded the first stimulus bill with plenty of home-town pork, and with $50 billion more in borrowed cash, don't expect them to be shy the second time around.
However, don't expect it to work, either. The original Porkulus had $105 billion in so-called "infrastructure investments," and none of it produced any economic growth. Transportation accounted for $48 billion; energy infrastructure and R&D got the same amount of money. Housing got $10 billion. Front loaded or not, the money got allocated and borrowed, and we're back to flatlining economic growth just eighteen months later -- only now we have a lot more debt on top of the other problems we had.
Economists agree spending on infrastructure a "good idea," a second stimulus package is needed
Krugman: Infrastructure plan is "a good idea," although what has been proposed is "much too small." In a September 7 blog post, Nobel laureate economist Paul Krugman wrote that the proposal to spend $50 billion on infrastructure spending was "a good idea," although he felt the proposed amount of money to be spent was "much too small." He argued that it was "better" to "put $50 billion of resources that would otherwise be idle to work" by using the money "to produce public goods like improved roads," than it would be to spend the money on "private goods like more consumer durables." He added:
And there's a pretty good argument to be made that we are, in fact, starved for public goods in this country, so that it would actually be a good idea to shift some resources to public goods production even if we were at full employment; in that case, we should definitely give priority to public goods when trying to put unemployed resources to work.
Tyson advocates for increased infrastructure spending to create jobs and "the ability to grow and be productive in the future." When asked about the possible need for larger stimulus spending on the September 5 broadcast of CBS' Face the Nation, former chair of the Council of Economic Advisers Laura Tyson said:
I believe that we should look at infrastructure because we know before the recession, before the great recession, we know that we were vastly under-spending on the nation's infrastructure. You can sort of, therefore, start with the notion: infrastructure spending is terrific in two ways. It creates demand right away when you go out and get the project started and get the workers started. It also creates the ability to grow and be productive in the future.
Krugman: "Back in January '09 ... a number of us said, 'This is not commensurate with the scale of the crisis.' " On the September 5 broadcast of ABC's This Week, Krugman noted that many economists raised concerns that the stimulus might not be large enough when it was first proposed. Krugman said, "Back in January '09, when Obama was first announcing his plans, a number of us said this is not commensurate with the scale of the crisis." Krugman later added, "What we need is more demand."
Morgenson: "The stimulus was not big enough ... we need something instant." Also on Face the Nation, New York Times assistant business and financial editor Gretchen Morgenson, who received the Pulitzer Prize in 2002 for coverage of Wall Street, said: "The stimulus was not big enough. Because you would have seen far greater recovery. The unemployment numbers would be better, I think, if you had, if we wanted to think the stimulus was enough. But again I think that it has to be targeted. I think that what Laura, the point she made earlier is a good one. That is, let's go for things that will have a more immediate impact like, say, a payroll tax cut holiday or a payroll tax holiday. We need something instant, something a little bit quicker."
Zandi: "[A]dditional help" for the recovery "would be prudent." When asked about the possible need for a second stimulus on Face the Nation, Mark Zandi, chief economist for Moody's Analytics and a former economic adviser to John McCain's presidential campaign, answered:
Well, we are talking about other stimulus, right? I mean, an R&D tax credit, payroll tax holiday, job tax credit. All these things are different forms of stimulus. In fact, the federal government has provided a couple hundred billions dollars in additional stimulus beyond the recovery act stimulus that we put in place a year-and-a-half ago. So, we are doing that. In my view the recovery needs some more help. It would be prudent, I think, to provide some additional help through some of the things that we're talking about.
Conservatives opposed extending unemployment insurance
Fox hosts guest to deny that "unemployment check[s] creates jobs." On the July 15 edition of Fox & Friends, co-host Brian Kilmeade hosted Partnership Staffing Inc. CEO Bill Auchmoody, who claimed that unemployment benefits prevent unemployed workers from searching for jobs. During the segment, Kilmeade played House Speaker Nancy Pelosi's statement that unemployment insurance stimulates the economy and asked Auchmoody to comment. Auchmoody stated: "I don't know how an unemployment check creates jobs. You know, businesses create jobs. The economy and the government getting out of the way, in my opinion, helps create jobs."
Kilmeade: "Maybe" eliminating "unemployment benefits will get people to sober up" and get jobs. Referencing Senate Republicans who have blocked extending unemployment benefits, Kilmeade concluded the interview by telling Auchmoody that "maybe" the elimination of "unemployment benefits will get people to sober up and take some of your offers."
Varney seizes on WSJ op-ed to claim that "unemployment would be at 6.8%, not the 9.5%," if Congress hadn't "extended unemployment benefits." On the August 31 edition of Fox & Friends, Fox Business host Stuart Varney cited a Wall Street Journal op-ed by Harvard economics professor and Hoover Institute senior fellow Robert Barro to claim that, in Varney's words, "If we had not extended unemployment benefits to 99 weeks from the standard 26 weeks, [Barro] says, unemployment would be at 6.8%, not the 9.5%." According to Varney, Barro argued that "you extend benefits like this and it discourages people from going out to look for work especially, you know, the start of the benefit period because it's nearly two years."
Conservatives: Pelosi's statement that unemployment insurance is "a job creator," "laughable," and "provably incorrect." Following Pelosi's statement that unemployment insurance "injects demand into the economy" and "is a job creator," several conservative media figures mocked the notion. For example, blogger Ed Morrissey wrote that "the laughable notion from Nancy Pelosi that jobless benefits provide the biggest possible stimulus to the economy that Congress can create" is "both ridiculous and provably incorrect." Similarly, after playing Pelosi's comments on the the July 2 edition of Fox & Friends, co-host Alisyn Camerota called them "curious" and said it was "hard to parse the logic" of them." Glenn Beck also reacted incredulously to Pelosi's statement, asking, "Have you ever head of a guy who said, 'Hey, just a sec, I'm gonna pay you out of my unemployment check'?"
Economists agree that unemployment insurance has strong stimulative effect on GDP, employment
Krugman: "Aid to the unemployed creates jobs quickly." In his July 4 op-ed, Krugman wrote:
One main reason there aren't enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending. That's why the Congressional Budget Office rates aid to the unemployed as a highly cost-effective form of economic stimulus. And unlike, say, large infrastructure projects, aid to the unemployed creates jobs quickly -- while allowing that aid to lapse, which is what is happening right now, is a recipe for even weaker job growth, not in the distant future but over the next few months.
CBO scores "increasing aid to the unemployed" as the highest-scoring policy proposal to stimulate economy. In a January 14 report on "Policies for Increasing Economic Growth and Employment in 2010 and 2011," the nonpartisan Congressional Budget Office (CBO) stated:
Policies that could be implemented relatively quickly or targeted toward people whose consumption tends to be restricted by their income, such as reducing payroll taxes for firms that increase payroll or increasing aid to the unemployed, would have the largest effects on output and employment per dollar of budgetary cost in 2010 and 2011.
According to a table in the report, CBO estimated that increasing aid to the unemployed would have the greatest effects on GDP per dollar of budgetary cost and the second highest cumulative effect on employment of the policy options considered.
Elmendorf: Policies such as unemployment insurance "have a significant impact on GDP." In January 2009, CBO director Douglas Elmendorf testified:
Transfers to persons (for example, unemployment insurance and nutrition assistance) would also have a significant impact on GDP. Because a large amount of such spending can occur quickly, transfers would have a significant impact on GDP by early 2010. Transfers also include refundable tax credits, which have an impact similar to that of a temporary tax cut.
A dollar's worth of a temporary tax cut would have a smaller effect on GDP than a dollar's worth of direct purchases or transfers, because a significant share of the tax cut would probably be saved. The nonbusiness tax cuts in H.R. 1 would reduce revenues much more in calendar year 2010 than in calendar year 2009 because much of the reduction in taxes would be realized by households when they filed their returns in 2010.
Zandi estimated that extending unemployment insurance benefits provides significant stimulus. In his July 24, 2008, House testimony, Zandi rated "Fiscal Economic Bank for the Buck," defined as "One year $ change in real GDP for a given $ reduction in federal tax revenue or increase in spending." "Extending UI Benefits" was the second-highest of 13 policy options, behind "Temporary Increase in Food Stamps." The Economic Policy Institute created the following graphic based on Zandi's figures:
Center on Budget and Policy Priorities: "The money gets spent fast and its effects spread through the economy." From an April 16 Center on Budget and Policy Priorities document:
Temporary increases in unemployment insurance benefits score high in "bang-for-the-buck" calculations of their economic impact as stimulus. The money gets spent fast and its effects spread through the economy. As a result of such policies, local businesses are less apt to lay off workers and cut back on orders from their suppliers during a downturn; and in the early stages of a recovery, they are more apt to hire additional workers and step up their orders. Policymakers have always ended these emergency UI benefits once a strong and sustainable economic recovery is underway.
Joseph Stiglitz: Stimulus "should begin by strengthening the unemployment insurance system." In a January 23, 2008, op-ed, Nobel laureate Joseph Stiglitz wrote that "America's economy is headed for a major slowdown" and that "[t]he country needs stimulus." Proceeding to describe the "optimal package," Stiglitz recommended: "We should begin by strengthening the unemployment insurance system, because money received by the unemployed would be spent immediately."
Blinder: "Extending unemployment benefits is one of the best forms of stimulus we know." On July 2, NPR reported that former vice chairman of the Federal Reserve and Clinton economic adviser Alan Blinder "supports the effort to extend expiring unemployment benefits." NPR quoted Blinder as saying: "Extending unemployment benefits is one of the best forms of stimulus we know."
Martire: Stimulus from unemployment benefits "greater than any other fiscal action government can take." In a June 30 piece in the State Journal-Register of Springfield, Illinois, Center for Tax and Budget Accountability executive director Ralph Martire wrote:
As for the contention that extending UI encourages people to avoid finding jobs so they can stay on the public dole -- well, it's just plain goofy. In May 2010, the private sector created only 41,000 jobs. That's 72,000 less than what's needed to keep up with the demand generated by natural work-force growth, much less creating the positions needed for the unemployed to find work. No one's thumbing a nose at getting hired to live in luxury eating government cheese -- there simply are no private sector jobs available.
Perhaps the hawks have forgotten that consumer spending accounts for more than two-thirds of the nation's economy. The best consumers are low- and middle-income folks, who don't earn enough to save, so they spend their paychecks. That is, when they have paychecks. See, if they've lost their jobs and the private sector isn't creating jobs and the feds cut off unemployment benefits, their ability to spend drops to, well, nil. Which is why the amount of private sector economic activity stimulated by unemployment benefits is greater than any other fiscal action government can take. In fact, dollar-for-dollar, it's five times more stimulative than the Bush tax cuts.
Sure, the long-term deficit has to be dealt with -- but honestly and responsibly. Short-term, deficit spending -- particularly on things like unemployment insurance, food stamps, housing assistance and the like -- is creating jobs and saving the U.S. economy from disaster.
EPI's Mishel explains why unemployment insurance is "such good stimulus." In a June 10 hearing before the House Ways and Means Income Security and Family Support Subcommittee, the Economic Policy Institute's Lawrence Mishel testifed:
As I have explained, the only real option for increasing economic activity and consumer demand for goods and services is federal government intervention in the economy, specifically through more deficit spending. The safety net programs are a vital part of this picture.
The reason extending unemployment insurance is such good stimulus is that it gets money to people who are the most likely to have depleted their savings and thus tend to have no choice but to quickly spend essentially every dollar they receive on necessities found in their local economy. In other words, virtually every dollar spent on extending unemployment insurance benefits goes directly, and immediately, toward the purchase of local goods and services, providing an extremely efficient demand boost. Not only is extending and expanding UI benefits the right thing to do for the people hurt most by this economic downturn, it is also excellent economic policy.
CEPR's Schmitt: Unemployment insurance helps "sustain a community." In an April 28 article, McClatchy Newspapers reported:
And allowing workers to fall off the unemployment insurance rolls can have negative ripple effects, said John Schmitt, senior economist with the Center for Economic and Policy Research.
"It hits individuals hard, but it also hits their communities, and more broadly the country," Schmitt said. "Having unemployment insurance benefits can help sustain a community through a very difficult time."
Conservatives opposed aid package to schools and states
NYP's McMahon: " 'Rescue' plan to sink New York." In an August 6 New York Post column, E.J. McMahon declared the $26 billion aid package to states and school districts to be "[m]ore stimulus poison." He claimed that the "the result" of the package "will be even more spending that New York taxpayers can't possibly sustain."
NYP attacked plan by falsely suggesting it would increase the deficit. An August 12 New York Post editorial misleadingly claimed that CBO said the recently passed state aid bill "will bloat the deficit another $13 billion over 10 years, using 'pay as you go' accounting." However, that figure excludes much of the savings used to pay for the bill, and CBO said that when accounting for these savings, the measure reduces deficits by around $1.4 billion over 10 years.
Hoft: "Nancy Pelosi's Cash for Democrat Reelection Program." In a August 10 Gateway Pundit post, Jim Hoft dubbed the aid package "Nancy Pelosi's Cash for Democrat Reelection Program" and highlighted GOP Rep. Michele Bachmann's dubious claim that the money would "allow public employee unions to run ads against the GOP in the upcoming election on the taxpayers' dime." Hoft declared this to be "outrageous."
Malkin: Pelosi "deserves a swift rap on the knuckles for hiding underneath the desk of the American schoolteacher." In an August 11 column, Michelle Malkin attacked the aid package as an example of "fiscal recklessness." From her column:
House Speaker Nancy Pelosi deserves a swift rap on the knuckles for hiding underneath the desk of the American schoolteacher. In a cynical ploy to evade accountability for the Democrats' continued fiscal recklessness, Pelosi accused opponents of the $26 billion public employee union bailout bill of "demeaning" teachers -- and nurses, police officers and firefighters.
Beck: State aid is "trapping your state into making sure that they cannot tighten their belt." On the August 11 broadcast of Beck's radio show, he asserted that the aid package is "trapping your state into making sure that they cannot tighten their belt." He added that they're "putting cement in front of the exit doors" and that the assistance will lead to a "global system." Beck also falsely suggested that the assistance package would add to the deficit and spoke in a drawl and got down on his knees to attack this package.
Economists stress the stimuluative effects of state aid
Zandi: State aid boosts GDP by $1.36 for every dollar spent. In testimony given on July 24, 2008, before the House Committee on Small Business, Zandi noted that "General Aid to State Governments" would boost real GDP by $1.36 for every dollar spent. Zandi also testified to the benefits of providing aid to state governments, specifically in the form of expanding Medicaid funds:
Another economically potent stimulus is aid to financially-pressed state governments. This could take the form of general aid or a temporary increase in the Medicaid matching rate, to help ease the costs of health coverage. Such help appears unlikely in the current stimulus plan, but this could quickly change in coming weeks if the economy's problems grow more severe and widespread as the legislation is being fashioned.
Fiscal problems have already developed in half the nation's states. Tax revenue growth has slowed sharply with flagging retail sales and corporate profits. Income tax receipts are also sure to suffer as the job market weakens. California and Florida are under the most financial pressure, but states as far-flung as Arizona, Minnesota, and Maryland are also struggling.
As most state governments are required by their constitutions to quickly eliminate their deficits, most are already drawing up plans to cut funding for programs ranging from health care to education and cutting grants to local government. Local governments are having their own financial problems; most rely on property-tax revenues, which are slumping with house prices. Cuts in state and local government outlays are sure to become a substantial drag on the economy later this year and into 2009.
The following table accompanied Zandi's testimony:
Center for Budget and Policy Priorities: State aid "would constitute one of the most effective uses of" federal dollars. In a March report, Center for Budget and Policy Priorities (CBPP) economists Iris J. Lav, Nicholas Johnson and Elizabeth McNichol concluded:
State fiscal assistance under ARRA will end or largely be exhausted by the end of calendar year 2010. Unfortunately, big state deficits are expected to continue through state fiscal year 2012 -- that is, for another 18 months or so after 2010 ends. If states do not receive additional federal assistance beyond the scheduled expiration of such aid, they will be forced to institute further deep budget cuts and/or substantial tax increases. Such actions would place a drag on the U.S. economy, impeding the recovery and costing many jobs. Such measures also could cause serious hardship for many families and individuals that have lost their jobs and are relying on Medicaid and other key state services to make it through this unusually painful economic downturn.
For both economic and other reasons, the provision of some additional fiscal relief, so that such relief is extended or phased down after 2010 rather than ending abruptly at that point, would be highly desirable. It would constitute one of the most effective uses of additional dollars to boost the weak economy and preserve or create jobs.
EPI: State aid "can help prevent" further economic downturn." In a January 11, 2008 report, the Economic Policy Institute noted:
During times of recession, state budgets are hit particularly hard. Reductions in tax receipts and cyclical increases in state spending put pressure on budgets -- and since most states have balanced budget requirements, they are forced to either reduce spending or increase taxes in times of decreased economic activity. These actions perversely add to economic troubles by decreasing the total demand for goods and services, and thus intensify a recession. As such, direct federal assistance to states can help prevent these outcomes and stimulate the economy. In the last recession, Congress provided $20 billion in aid to the states, split between general revenue sharing and a temporary increase in the federal match for Medicaid. The same kind of assistance should be provided to the states once again, with $30 billion split equally between a general block grant and an increase in the Medicaid match.
Conservatives opposed increased funding for food stamps
O'Reilly: "[I]ncreased food stamps" have "nothing to do with stimulating the economy." On the January 28, 2009, edition of Fox News' The O'Reilly Factor, host Bill O'Reilly claimed that "increased food stamps" have "nothing to do with stimulating the economy." Earlier in the day on his radio show, O'Reilly similarly claimed that "enhanced food stamps" in the bill are "not gonna help the economy at all. That will not help the economy one bit." He added: "In fact, in the entitlement realm, just giving people money who are poor is about $250 billion. Some of that money will be spent. Some of it, like food stamps, you know, it's not gonna help the economy."
CNN's Brown falsely claimed that "food stamps, unemployment benefits not likely to stimulate the economy." On the January 27, 2009, edition of CNN's Campbell Brown: No Bias, No Bull, host Campbell Brown asserted: "Food stamps, unemployment benefits not likely to stimulate the economy because these are the people who are in the most dire straits spending the bare minimum." Brown added: "So the stimulus part comes from the big spending package that we're going to talk about." CNN's chief business correspondent Ali Velshi responded: "Right. And, you know, maybe the $500 or $1,000 you get per family. But you're absolutely right. There are some of these things that are more about recovery than stimulus. The administration likes to call it a recovery bill. If you're giving food stamps and you're giving unemployment benefits, that's not stimulus; that's simply helping people out who are in a lot of trouble."
Economists widely acknowledge stimulative nature of food stamps
Elmendorf: "Nutrition assistance" would "have a significant impact on GDP." In January 27, 2009, written testimony before the House Budget Committee, Elmendorf stated that "[t]ransfers to persons (for example, unemployment insurance and nutrition assistance) would ... have a significant impact on GDP." He added: "Because a large amount of such spending can occur quickly, transfers would have a significant impact on GDP by early 2010. Transfers also include refundable tax credits, which have an impact similar to that of a temporary tax cut."
Zandi: "[E]xtending food stamps are the most effective ways to prime the economy's pump." In his July 24, 2008, written testimony before the House Committee on Small Business, Zandi stated that "extending food stamps are [sic] the most effective ways to prime the economy's pump." Zandi further explained: "People who receive these benefits are very hard-pressed and will spend any financial aid they receive within a few weeks. These programs are also already operating, and a benefit increase can be quickly delivered to recipients." Zandi included with his testimony a table stating that a "Temporary Increase in Food Stamps" had the highest "Fiscal Economic Bank for the Buck" of any other potential stimulus provision he analyzed, providing a $1.73 increase in real GDP for every dollar spent.
Conservatives opposed the stimulus
Since its passage, right-wing media have falsely claimed the package failed. Right-wing media figures and outlets frequently promote the false claims that the stimulus "didn't work" and "has not created jobs."
Conservatives opposed stimulus at the time of passage. Before and during passage of the American Recovery and Reinvestment Act (ARRA) on February 13, 2009, right-wing media figures expressed opposition the bill, by, among other things, falsely claiming that billions would go to ACORN, inflating the job creation costs, misrepresenting CBO estimates, falsely comparing it to previous unsuccessful Japanese economic policies, falsely claiming that stimulus money would go to undocumented workers, falsely claiming corporate tax rate cuts would be more effective than the stimulus, and claiming the recession would end on its own.
Economists say the stimulus supported recovery
Economists say the stimulus helped economic recovery. Most fiscal analysts and economists agree that the stimulus has boosted GDP and reduced unemployment. For example, a report released in August by CBO estimated that the stimulus lowered the unemployment rate by between 0.7 and 1.8 percentage points, and the Council of Economic Advisers (CEA) stated that "the ARRA has raised the level of GDP as of the second quarter of 2010, relative to what it otherwise would have been, by between 2.7 and 3.2 percent." Additionally, multiple surveys of economists have found that a majority believe that the stimulus has helped.