In advance of President Obama's speech on job creation, right-wing media have falsely claimed that the stimulus failed. In fact, independent economists agree that the stimulus significantly raised employment and increased GDP, and experts say it is the winding down of stimulus spending that is causing a “fiscal drag” on the economy.
Right-Wing Media Falsely Claim Stimulus “Failed”
Wash. Times Suggests Stimulus Measures “Didn't Work In 2009.” From a September 7 Washington Times editorial titled, “Stimulus Jr.” :
As with Mr. Obama's $825 billion spending spree in 2009, the ostensible goal of the latest giveaway is to jump-start job creation. At least he has the priority straight. The economy failed to create any jobs at all last month, the unemployment rate has been stuck above 9 percent for most of this year, and the rate of long-term joblessness has been growing steadily while labor-force participation has declined. It's his “solution” that will make the situation worse. Temporary tax cuts and permanent spending on “shovel-ready” infrastructure didn't work in 2009, and they won't work now. This time around, instead of pretending to build roads and bridges, the administration's gimmick is to direct a big chunk of the spending to states and local governments to improve school infrastructure and hire more staff in schools. [The Washington Times, 9/7/11]
RedState Parrots Republican National Committee: “Same Words, Same Speeches, Same Failed Policies.” In a September 7 RedState post, Dan Spencer wrote:
Obama's new jobs plan looks remarkably like his $830 billion 2009 economic stimulus package.
At an estimated cost of $300 billion, it looks like another so-called stimulus that won't be any more effective than Obamacrats'[.]
In typical Obama fashion, Obama proposes to pay for his new stimulus plan by asking Congress to raise tax revenue in later years.
As the good folks at the RNC put it:
Same words, same speeches, same failed policies.
Malkin: Jobs Speech Will Be “President Obama's Redundant Festival of Failed Spending Orgies.” In a September 7 post on her blog, Michelle Malkin wrote:
There's “Take Your Daughter to Work Day.”
Now, here's a clever twist that all GOP politicians who are attending President Obama's Redundant Festival of Failed Spending Orgies should join:
“Take an Entrepreneur to Capitol Hill Day.” [MichelleMalkin.com, 9/7/11]
Powers Suggests Stimulus “Didn't Work.” In a September 6 post on Malkin's website, Doug Powers wrote, “In the used car lot of failed government programs, this sales technique is known as 'same lemon, different paint job.' ” Powers went on to quote an article from The Hill titled, “Pelosi drops the word 'stimulus,' ” and wrote, “And yet Debbie Wasserman Schultz thinks that only Republicans are saying the Recovery Act didn't work?” [MichelleMalkin.com, 9/6/11, emphasis in original]
Weasel Zippers: “All Aboard The [Stimulus] Failure Express.” A September 6 post on the blog Weasel Zippers stated, “Obama Demands Republicans 'Get On Board' His Plan For More Stimulus Spending,” and concluded, “All aboard the Failure Express.” [Weasel Zippers, 9/6/11]
But Economists Have Said It's A Decline In Stimulus Spending That Is Causing A “Fiscal Drag” On The Economy
CBO: 85 Percent Of Stimulus Funds Spent By End Of June. In its latest report on the effects of the American Recovery and Reinvestment Act, the Congressional Budget Office (CBO) reported that 85 percent of the stimulus had been spent by the end of June 2011. [Congressional Budget Office, August 2011]
Krugman: “When The Spending Begins To Tail Off, The Effect On Growth Turns Negative.” Paul Krugman, a Nobel prize-winning economist and New York Times columnist, wrote in December 2009 that stimulus spending was projected to peak in 2010. He added, “And when the spending begins to tail off, the effect on growth turns negative.” [The New York Times, The Conscience of a Liberal, 12/27/09]
Deutsche Bank: “As Stimulus Programs Wind Down” In 2011, “We'll Then Have A Straight Four Quarters Of Fiscal Drag.” According to a November 2010 Business Insider report, Deutsche Bank projected that “the real effect of lost stimulus will start to hit” in the first quarter of 2011. The report continued, “We'll then have a straight four quarters of fiscal drag.” [Business Insider, 11/5/10]
Mark Zandi: “The Benefit [Of The Stimulus] Is Fading, But This Is By Design.” According to Talking Points Memo, Mark Zandi, Moody's chief economist, explained that the American Recovery and Reinvestment Act “was never intended to be a source of long-term economic growth” and that the stimulus provided “a significant benefit to the economy's performance over the past more than two years.” Zandi added, “This benefit is fading, but this is by design.” [Talking Points Memo, 7/5/11]
And The Stimulus Was An $825 Billion Plug ...
CBO: Cost Of Stimulus Is $825 Billion. In its latest report on the stimulus, the Congressional Budget Office estimated that the Recovery Act would cost $825 billion over 10 years. [Congressional Budget Office, August 2011]
... To Fit A $2 Trillion Hole
Krugman: Economic Gap Was More Than $2 Trillion. Krugman wrote in a January 8, 2009, column:
Even the C.B.O. says, however, that “economic output over the next two years will average 6.8 percent below its potential.” This translates into $2.1 trillion of lost production. “Our economy could fall $1 trillion short of its full capacity,” declared Mr. Obama on Thursday. Well, he was actually understating things.
To close a gap of more than $2 trillion -- possibly a lot more, if the budget office projections turn out to be too optimistic -- Mr. Obama offers a $775 billion plan. And that's not enough. [The New York Times, 1/8/09]
NYT's Leonhardt: “The Recession Is Likely To Idle Almost $2 Trillion Of Resources.” From David Leonhardt's February 4, 2009, New York Times analysis:
The recession is likely to idle almost $2 trillion of resources -- buildings, equipment and people -- this year and next, yet the current stimulus will fill only $700 billion of the hole. Several liberal economists, the forecasters at Goldman Sachs and Mark Zandi (an economist whose forecasts the administration has used) all argue for a bill of at least $1 trillion. [The New York Times, 2/3/09]
And The Stimulus Still Lowered Unemployment And Boosted GDP
CBO: Economic Stimulus Increased Employment By More Than 1 Million Jobs. An August 2011 CBO report estimated that the American Recovery and Reinvestment Act "[l]owered the unemployment rate by between 0.5 percentage points and 1.6 percentage points" and that the law "[i]ncreased the number of people employed by between 1.0 million and 2.9 million" during the second quarter. [Congressional Budget Office, August 2011]
CBO: Economic Stimulus Raised GDP. The same CBO report estimated that the Recovery Act “raised real (inflation-adjusted) gross domestic product (GDP) by between 0.8 percent and 2.5 percent.” [Congressional Budget Office, August 2011]
Private Analysts Estimate Stimulus Increased GDP By 1.8 To 2.7 Percent. In its seventh quarterly report on ARRA, the president's Council of Economic Advisers (CEA) estimated that the stimulus “has raised the level of GDP as of the first quarter of 2011, relative to what it otherwise would have been, by between 2.3 and 3.2 percent.” CEA also provided a chart showing that private analysts estimate that the stimulus boosted GDP between 1.8 and 2.7 percent:
[Council of Economic Advisers, 7/1/11]
Private Analysts Estimate Stimulus Increased Employment By 2.4 To 2.5 Million. In its report, the CEA provided the following chart showing that private forecasters estimate that as of the first quarter of 2011, the stimulus increased employment between 2.4 and 2.5 million:
[Council of Economic Advisers, 7/1/11]
While Meeting The Administration's Projections
2009: Obama Economic Advisers Predicted Stimulus Would Boost GDP By 3.7% And Increase Employment By 3.675 Million In The Fourth Quarter Of 2010. In January 2009, economic advisers to then President-elect Obama projected the effects of a fiscal stimulus based on economic conditions as they were understood at the time. They estimated the relative effects on employment and GDP, predicting that during the fourth quarter of 2010 the stimulus would increase GDP by 3.7 percent, increase employment by 3.6 million, and reduce unemployment by 1.8 percent. [Job Impact of the American Recovery and Reinvestment Plan, 1/10/09]
2009 Projections Are In Line With Actual Data From 2010. From CBO's August 2011 report on the estimated impacts of the stimulus:
[Congressional Budget Office, August 2011]