Comment permalink

Once Again, Obama's Stimulus Worked. It Just Didn't Work Enough

Obama's stimulus created millions of jobs, it just wasn't large enough to "do the job" of speeding up the recovery.

Despite some conciliatory remarks by House Republicans before Obama's jobs speech on Thursday, GOP backlash to his jobs creation proposals have been ad nauseam, and largely the same fundamental argument. "Second Stimulus", "Son of Stimulus", "Stimulus Replay", "Stimulus Two". What Republicans are referring to, of course, is the 2009 Recovery Act, a nearly $1 trillion federal stimulus plan to kickstart our economy a year after the initial crash, and a plan that the GOP has made widely known it believes failed. The problem is that Obama's 2009 stimulus did not fail. In fact, it worked, it just didn't work enough because the Obama administration had underestimated the scope and depth of this recession, one of economic collapse similar to the Great Depression. Republicans' main evidence for discounting the success of the original stimulus is to say "look around, look how bad things are," discounting economists and the Congressional Budget Office, both of whom say that without it, things would have been much worse.

The Congressional Budget office has done several analyses on the effective success of the Recovery Act, showing that it protected or supported millions of full-time jobs at the lowest point in our economy in 2009 through today. In fact, with the additional time that it allowed many workers to put in who were already employed, the CBO estimates that the Recovery Act supported between 1.4 million and 4 million jobs as of June of this year. That's well within the President's range of 3.5 million he expected to save through the 2009 stimulus. Not that this argument over the federal stimulus' effectiveness has been based on evidence, but several economists have compiled graphs to show the immediate effectiveness of The Recovery Act. When the bill was signed in February of 2009 there was an immediate uptick in monthly job growth while unemployment rate, which had been growing dramatically through 2008, suddenly stabilized. In addition, GDP shrank only one more quarter before growing, albeit slowly, every quarter afterward.

Economists are now calling for further stimulus spending in Obama's new jobs creation plan, the one the GOP has labeled "son of stimulus". Michael Hanson, senior economist at Bank of America and a former Federal Reserve economist, says that Obama's proposed Social Security tax cuts alone would add 1 percentage point to economic growth and create 1 million jobs a year, lowering unemployment by half a percentage point by 2012. The reason is that Social Security taxes would be cut on the first $5 million of a business' revenue, giving small businesses room to breathe while larger businesses, that have been much quicker to recover, will continue to pay in. As much as the GOP will try to characterize stimulus spending as short-sighted "big government" policy making, the facts do not support it. Unfortunately, many of their campaigns are short on facts and long on rhetoric, but it doesn't seem to bother their constituency much.  The best thing for Washington to do right now, as President Obama said, "you should pass it."