Today marks one year since President Obama signed the American Reinvestment and Recovery Act, otherwise known as the stimulus, into law in Denver, Colorado. In January 2009, Obama administration economists predicted the stimulus would hold unemployment to 8 percent, and that without a stimulus unemployment would rise to 9 percent. Instead, unemployment rose to a high of 10.1 percent before falling to 9.7 percent in January 2010. Majorities now oppose the stimulus. Only six percent of respondents in the recent New York Times / CBS News poll believe the stimulus has already created jobs.
The stimulus had three parts: transfers to state governments, a tax rebate, and infrastructure spending. The best you can say for the stimulus is that it prevented state, local, and municipal governments from firing heavily unionized public sector employees during a recession. In an email to supporters last night, former Obama campaign manager David Plouffe credited the stimulus with slowing the rate of job loss over the last year. Memo to Obama reelection team: "Slowing the rate of job loss" does not equal "recovery."
The tax rebate was meant to spur consumption, despite Obama's rhetoric that American consumers need to spend less and save more. In any case, the tax rebate failed -- just as prior tax rebates have failed, from Jimmy Carter's to George W. Bush's. Infrastructure spending? Most of it hasn't gone out the door. This is not what you would call "timely, temporary, and targeted."
The administration's defenders continue to grapple with straw men. David Leonhardt may believe the "case against the stimulus revolves around the idea that the economy would be no worse off without it," but he's wrong. The case against the stimulus was that it was not the most effective way to respond to the recession. The question has always been whether there was a better way to promote economic growth -- a way that did not involve such long-term costs for such meager short-term gains.
As Reihan Salam notes, Leonhardt quotes economist Nariman Behravesh, author of the excellent Spin Free Economics, who says the stimulus "prevented things from getting much worse than they otherwise would have been." This is probably true. But Leonhardt doesn't seem to have asked Berhavesh whether he agrees the stimulus was the best use of one trillion debt-financed dollars. Based on a conversation with Behravesh I had last year, my guess is he would disagree with that proposition.
Mike Allen says the administration sees Leonhardt's column as the "seminal piece" on the Recovery Act (sorry, Vice President Biden) and that it is "def. driving [White House communications director Dan] Pfeiffer's day." If so, then the White House economic team has their work cut out for them. The stimulus may have failed to energize the economy. But it has been an object lesson for the people in the limits of big government -- and it has caused a decisive swing in public opinion to the right. That may turn out to be the most beneficial legacy of this bad, bad bill.