Assessing the Recovery Act: 'The best is yet to come'
By Joe BidenFirst, we think the Recovery Act is working because of the progress we've made in slowing job loss. In the three months before the act took effect, America lost 750,000 jobs a month. In the last three months, we've lost about 35,000 jobs a month. That's progress — not good enough, not where we need to be, but progress. And most economists agree that that progress is thanks in a very large part to the Recovery Act.
Second, the Recovery Act is working because it is helping hard-hit families get through tough economic times. If you get a paycheck, you got a tax cut from the Recovery Act, which lowered the amount of withholding for over 95% of working Americans. If you are a senior citizen, or a veteran, you got a $250 check to help pay your bills. If you are unemployed, your benefits were extended thanks to the Recovery Act. In fact, these tax cuts and direct aid to individuals are the largest parts of the Recovery Act — more than half of all Recovery Act spending has gone to cut taxes or provide relief to seniors, veterans and the unemployed.
Look around for results
Third, we know that the Recovery Act is working because we can see the results all around us. Thousands of road projects are not only creating jobs — they are making for faster, safer transportation. Superfund sites are being cleaned up and commuter rail tracks are being repaired. Work is underway on water, weatherization and construction projects — creating jobs now, and making critical improvements in our nation's infrastructure for the future.
And yet, to me, the most exciting thing about the Recovery Act is not what we've done, but what lies ahead. Many Recovery Act programs that will build the groundwork for the economy of the 21st century will be implemented in the next few months. Broadband access for small and rural communities. New factories where electric cars and clean fuel cells will be made. Wind farms, solar panels — and the facilities to construct them. New health technologies and smarter electrical power grids will be creating jobs this year thanks to the Recovery Act. Truly, the best is yet to come.
'A long way to go'
We've gotten the act moving ahead of schedule, and most projects are coming in under budget. A tough, independent group of inspectors general is on the lookout for fraud, and we've killed scores of projects that don't pass muster. Your tax dollars are being used wisely and quickly to turn the economy around.
We're on track to meet or beat our goal of saving or creating 3.5 million jobs by the end of this year. Work on road, rail, bridge, airport and other infrastructure projects will expand dramatically as warm weather returns. Projects that needed final planning in 2009 will see construction in 2010.
Americans know this downturn isn't over yet — we have a long way to go before we are over the economic chasm left by the Great Recession. Year Two of the Recovery Act will build on the successes of Year One, continuing to generate jobs while seeding the transformative investments needed to ensure that our economy remains the world's strongest.
(AP.)
The failure of a stimulus
Posted By Michael Steele On February 17, 2010 @ 12:00 am In Opinion, Opinion:Upper Section, Sub2:Opinion | 4 Comments
Over a year ago, the American people placed an enormous amount of trust in President Obama to make good on his promises of renewed responsibility and a new era of political bipartisanship. However, when faced with an extreme economic downturn he used the crisis as a means to his liberal ends and with the help of his Congressional allies forced his failed $862 billion stimulus package on America.
Today marks the one-year anniversary of this failed stimulus package, something the president still claims as one of his signature achievements and which he proclaimed would “create or save” 3.5 million jobs and keep unemployment below 8 percent. Since those early heady days of the Obama administration the American people have seen behind the curtain of rhetoric and watched as millions of jobs were lost and unemployment rose into the double digits.
While the Democrats spend their President’s Day recess celebrating their stimulus bill, something Speaker Nancy Pelosi called “a hallmark achievement of this Congress,” the American people are faced with the daily consequences of broken promises and fiscal irresponsibility. The fact is over 20,000 Americans lost their jobs in the month of January, meaning more than 2.8 million Americans have lost their jobs since the stimulus passed. And let’s not forget the 136,000 workers became discouraged last month from seeking work, bringing the total number of workers who have given up hope of finding a job to over 1 million.
President Obama promised 3.5 million jobs would be created by December 2010 which means Democrats need to create 6.3 million jobs over the next 10 months to meet their own rhetorical standard, a level of job growth that has never been achieved in American history. The president might call his fiscal and job creation plans a “new foundation for prosperity,” but in reality his binge spending agenda sets the stage for the type of economic stagnation that would make even Jimmy Carter blush.
Now let there be no question: the American economy will recover. The American people and their ingenuity, entrepreneurship and resiliency have always overcome challenging times. But President Obama and Congressional Democrats have done nothing to help the worker or the entrepreneur to overcome such times sooner. Instead, they conceitedly pushed a job-killing agenda that included a $2.5 trillion government takeover of health care and a cap-and-trade national energy tax scheme that has only brought instability to our economy and insecurity to the American people.
President Obama pledged that Joe Biden would lead “unprecedented oversight effort” for the $862 billion stimulus package, “because nobody messes with Joe.” However, here in the real world almost everyone messes with “Joe,” and in light of a year full of false job reports, phantom Congressional districts, and millions spent on “stimulus” road signs, it is clear that “Joe” has lost whatever edge he might have had.
Time and time again, Republicans have offered proven alternative solutions for job creation and economic growth centered on lower taxes and less regulation, but these ideas have been ignored by President Obama and Congressional Democrats. The president can scold the Republican Party for principled opposition and label us the Party of “no” all he wants but it doesn’t change the simple fact that Democrats completely control Washington and have used their power to go on a binge spending spree instead of providing real economic growth for the American people.
Despite the utter failure of major policy initiatives, President Obama and Capitol Hill liberals continue to arrogantly believe that government knows what’s best for Americans. It is this is the type of arrogance that defines the differences between Democrats and Republicans. Democrats like President Obama have put their faith in the institution of big government to solve the problems this nation faces. For them America will only move forward with a top-down liberal agenda. Republicans, on the other hand, have put their faith in the American people and know that sustainable growth will only come from bottom-up solutions to grow the economy and create jobs. Pride truly does cometh before a fall. And if Virginia, New Jersey and Massachusetts tell us anything, this “fall” could be big.
Michael Steele is chairman of the Republican National Committee
Judging Stimulus by Job Data Reveals Success
Matthew Staver/Bloomberg News
President Obama, with Joseph Biden, after Mr. Obama signed the stimulus bill into law last year.
WASHINGTON
Imagine if, one year ago, Congress had passed a stimulus bill that really worked.
Let’s say this bill had started spending money within a matter of weeks and had rapidly helped the economy. Let’s also imagine it was large enough to have had a huge impact on jobs — employing something like two million people who would otherwise be unemployed right now.
If that had happened, what would the economy look like today?
Well, it would look almost exactly as it does now. Because those nice descriptions of the stimulus that I just gave aren’t hypothetical. They are descriptions of the actual bill.
Just look at the outside evaluations of the stimulus. Perhaps the best-known economic research firms are IHS Global Insight, Macroeconomic Advisers and Moody’s Economy.com. They all estimate that the bill has added 1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs. The Congressional Budget Office, an independent agency, considers these estimates to be conservative.
Yet I’m guessing you don’t think of the stimulus bill as a big success. You’ve read columns (by me, for example) complaining that it should have spent money more quickly. Or you’ve heard about the phantom ZIP code scandal: the fact that a government Web site mistakenly reported money being spent in nonexistent ZIP codes.
And many of the criticisms are valid. The program has had its flaws. But the attention they have received is wildly disproportionate to their importance. To hark back to another big government program, it’s almost as if the lasting image of the lunar space program was Apollo 6, an unmanned 1968 mission that had engine problems, and not Apollo 11, the moon landing.
The reasons for the stimulus’s middling popularity aren’t a mystery. The unemployment rate remains near 10 percent, and many families are struggling. Saying that things could have been even worse doesn’t exactly inspire. Liberals don’t like the stimulus because they wish it were bigger. Republicans don’t like it because it’s a Democratic program. The Obama administration hurt the bill’s popularity by making too rosy an economic forecast upon taking office.
Moreover, the introduction of the most visible parts of the program — spending on roads, buildings and the like — has been a bit sluggish. Aid to states, unemployment benefits and some tax provisions have been more successful and account for far more of the bill. But their successes are not obvious.
Even if the conventional wisdom is understandable, however, it has consequences. Because the economy is still a long way from being healthy, members of Congress are now debating another, smaller stimulus bill. (They’re calling it a “jobs bill,” seeing stimulus as a dirty word.) The logical thing to do would be to examine what worked and what didn’t in last year’s bill.
But that’s not what is happening. Instead, the debate is largely disconnected from the huge stimulus experiment we just ran. Why? As Senator Scott Brown of Massachusetts, the newest member of Congress, said, in a nice summary of the misperceptions, the stimulus might have saved some jobs, but it “didn’t create one new job.”
•The case against the stimulus revolves around the idea that the economy would be no worse off without it. As a Wall Street Journal opinion piece put it last year, “The resilience of the private sector following the fall 2008 panic — not the fiscal stimulus program — deserves the lion’s share of the credit for the impressive growth improvement.” In a touch of unintended irony, two of article’s three authors were listed as working at a research institution named for Herbert Hoover.
Of course, no one can be certain about what would have happened in an alternate universe without a $787 billion stimulus. But there are two main reasons to think the hard-core skeptics are misguided — above and beyond those complicated, independent economic analyses.
The first is the basic narrative that the data offer. Pick just about any area of the economy and you come across the stimulus bill’s footprints.
In the early months of last year, spending by state and local governments was falling rapidly, as was tax revenue. In the spring, tax revenue continued to drop, yet spending jumped — during the very time when state and local officials were finding out roughly how much stimulus money they would be receiving. This is the money that has kept teachers, police officers, health care workers and firefighters employed.
Then there is corporate spending. It surged in the final months of last year. Mark Zandi of Economy.com (who has advised the McCain campaign and Congressional Democrats) says that the Dec. 31 expiration of a tax credit for corporate investment, which was part of the stimulus, is a big reason.
The story isn’t quite as clear-cut with consumer spending, as skeptics note. Its sharp plunge stopped before President Obama signed the stimulus into law exactly one year ago. But the billions of dollars in tax cuts, food stamps and jobless benefits in the stimulus have still made a difference. Since February, aggregate wages and salaries have fallen, while consumer spending has risen. The difference between the two — some $100 billion — has essentially come from stimulus checks.
The second argument in the bill’s favor is the history of financial crises. They have wreaked terrible damage on economies. Indeed, the damage tended to be even worse than what we have suffered.
Around the world over the last century, the typical financial crisis caused the jobless rate to rise for almost five years, according to work by the economists Carmen Reinhart and Kenneth Rogoff. On that timeline, our rate would still be rising in early 2012. Even that may be optimistic, given that the recent crisis was so bad. As Ben Bernanke, Henry Paulson (Republicans both) and many others warned in 2008, this recession had the potential to become a depression.
Yet the jobless rate is now expected to begin falling consistently by the end of this year.
For that, the stimulus package, flaws and all, deserves a big heaping of credit. “It prevented things from getting much worse than they otherwise would have been,” Nariman Behravesh, Global Insight’s chief economist, says. “I think everyone would have to acknowledge that’s a good thing.”
So what now?
The last year has shown — just as economists have long said — that aid to states and cities may be the single most effective form of stimulus. Unlike road- or bridge-building, it can happen in a matter of weeks. And unlike tax cuts, state and local aid never languishes in a household’s savings account.
The ideal follow-up stimulus would start with that aid. It would then add on extended jobless benefits, which also tend to be spent, as well as tax credits carefully drafted to get businesses to hire and households to spend, like the cash-for-clunkers program.
By this yardstick, the $154 billion bill that the House passed in December is decent. It includes $27 billion in state and local aid, $79 billion for jobless benefits and other safety nets, and $48 billion in infrastructure spending.
The smaller bills being considered by the Senate are worse. They may end up with no state aid at all, and their tax credits sound better — with promises to help the long-term unemployed and small businesses — than they are. “The economic impact of the Senate bill, at this point, is starting to look very small,” Mr. Behravesh says.
Given what people have been saying about a successful stimulus bill, just imagine what they’ll say about one that doesn’t accomplish much.
The Washington Times
Originally published 05:00 a.m., February 17, 2010, updated 10:08 a.m., February 17, 2010
One year later, stimulus has mixed record
But the federal spending - all of it borrowed - has helped many states avoid painful budget cuts to their education and public safety budgets, and according to official estimates has helped the gross domestic product grow faster than it would have otherwise.
With health care stalled, his plans to address climate change on hold and spending ballooning, President Obama on Wednesday will mark the first anniversary of what's formally known as the American Recovery and Reinvestment Act by inviting to the White House people who have benefited from the money. And he's deploying his top aides to crisscross the country and highlight projects that have helped people and produced jobs.
"Almost 20 million Americans have gotten extended unemployment benefits thanks to the Act, and over 95 percent of working families have had their taxes cut," Vice President Joseph R. Biden Jr., whom the president tapped to oversee the recovery, said in a one-year progress report.
RELATED STORY: Biden: U.S. got 'money's worth' from stimulus act
"Jobs have been created thanks to tens of thousands of projects now under way nationwide. And the groundwork for the economy of the next century is being put in place as we invest in high-speed rail, health technology, broadband, a smarter electrical grid, clean cars and batteries, and renewable energy."
So far, that's proving to be a tough sell. A CBS-New York Times poll released last week found that just 6 percent of those surveyed thought the stimulus has created jobs, while 48 percent said they doubt that it will ever create jobs.
Republicans are eager to tout the stimulus as a failed presidential promise, and have laid plans to attack congressional Democrats in this year's election campaign for supporting the law.
"Americans are asking, 'Where are the jobs,' but all they are getting from Washington Democrats is more government, more borrowing, and more debt piled on the backs of our kids and grandkids," said House Minority Leader John A. Boehner, Ohio Republican.
Mr. Obama signed the stimulus bill into law after touring solar panels at a Colorado museum as a way of showing how the spending would boost clean-energy production and make investments in infrastructure projects the country should be funding.
But most of the money spent the first year went to tax cuts, subsidies to states so they wouldn't have to lay off government workers, and payments to the poor and unemployed. The Center on Budget and Policy Priorities, a liberal think tank, says the law kept 6 million people out of poverty in 2009, and the administration says it provided extended unemployment benefits to 20 million people.
The administration promises that in its second year, spending on infrastructure projects will pick up - beginning with an announcement Wednesday of $1.5 billion for transportation work.
When he signed the law, Mr. Obama said it would save or create 3.5 million jobs over two years, and his administration projected that unemployment would be kept to 8 percent. Instead, unemployment rose past 10 percent and now stands at 9.7 percent, and the economy has shed about 3 million jobs.
Only North Dakota and the District of Columbia have netted new jobs overall in the year since the stimulus law was passed.
"A year from now we may still be waiting for the millions of stimulus jobs and also worrying about that escalating debt the stimulus contributed to," said Brian Riedl, a budget analyst at the conservative Heritage Foundation.
Even some Democrats are worried about the record they have amassed over the past year.
"If I could create one job in the private sector by helping to grow a business, that would be one more than Congress has created in the last six months," Sen. Evan Bayh, an Indiana Democrat who this week announced his retirement from the Senate, told CBS.
The administration says the recession was deeper than first imagined, but insists there's plenty of evidence of how well the stimulus has worked. In his report, Mr. Biden says the law added several percentage points to gross domestic product growth over the last nine months of last year.
Some congressional Republican lawmakers have been accused of hypocrisy for saying the stimulus won't work while sending letters behind the scenes asking for money for local projects. As The Washington Times reported earlier this month, those Republicans often acknowledge in their letters that the projects will create jobs.
In his report, Mr. Biden says fraud has been kept to a minimum, and the record "compares very favorably with both public and private sector experiences."
Republicans, though, point to hundreds of thousands of dollars spent on studies such as the sex lives of female college students as examples of poor spending. And Congress issued a stinging rebuke of the U.S. Forest Service after it directed nearly $2.8 million of wildland firefighting money to Washington, D.C., for a green-jobs program. Congress let the city keep the money, but said the Forest Service must make better decisions in the future.
Pressure is building for another round of stimulus spending. The House last year passed a bill to boost job creation and the Senate plans to take up its own bill when it returns from a weeklong break.
Interest groups also are asking that education and social safety net programs be extended.
Mr. Obama included many of those extensions in the 2011 budget he sent Congress two weeks ago - something analysts said goes against the promises of temporary relief.
The Committee for a Responsible Federal Budget (CRFB) says if Congress enacts all the programs Mr. Obama wants to extend, the cost will jump to $1.5 trillion over 10 years, or nearly double the initial estimate.
"It was never supposed to be the purpose of stimulus to make permanent policy" said Marc Goldwein, policy director for CRFB. The fundamental principle of stimulus is it's a temporary infusion of money into the economy."
He said if Congress does want to extend the programs it should pay for that. Otherwise, the U.S. risks adding to an already difficult debt picture.
But Chad Stone, chief economist at the Center on Budget and Policy Priorities, said the success of the stimulus depends on extending and expanding parts of the law, particularly unemployment benefits, COBRA health care coverage and subsidies to states.
"If that is done we will look back at ARRA and its 2010 extensions as important contributors to a recovery that is beginning to gather real momentum. If we don't, we can look back on ARRA as a policy that kept the economy from going off a cliff and helped start a nascent recovery but one that needed to be supplemented by additional measures in 2010 and wasn't, with the result that the recovery has been weaker than it needed to be," he said.
When it was signed into law, the Congressional Budget Office calculated that the American Recovery and Reinvestment Act would cost $787 billion over 10 years, but last month CBO boosted that figure by $75 billion. The administration, however, has rejected the CBO's assumptions and says it's sticking with the $787 billion cost.
FEBRUARY 17, 2010Bulk of Stimulus Spending Yet to Come
Most Cash So Far Has Gone to Services, Government Jobs; Infrastructure Surge Unlikely to Put Big Dent in Unemployment
By LOUISE RADNOFSKY
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Stimulus money has subsidized the jobs of 325,000 teachers and schools staff, government data indicate. First-graders read aloud Friday in Vallejo, Calif.
Infrastructure spending is set to step up in the second year of the stimulus program, which should mean more money flowing to private-sector employers. Still, economists say that won't likely have a big effect on the unemployment rate, which most say is likely to continue a slow decline as the broader economy recovers.
The shift could be significant politically, though, because Republicans have criticized the relative lack of private business hiring directly attributed to the stimulus.
The approach this week of the stimulus program's one-year anniversary sparked a fresh round of dueling partisan statements, as Democrats sought to credit the effort with averting a deeper recession and Republicans said the program deserved a failing grade. But in terms of spending, the stimulus is largely incomplete.
Most of the money allocated to specific projects hasn't been paid out yet, and there are still an additional $195 billion in tax cuts on the way.
Proponents of the stimulus program focused attention on infrastructure projects during the fight to win approval for it last year. But the bulk of the money proposed for projects like new rail lines and water projects—about $180 billion in all—is likely to be spent this year at the earliest. During year one of the stimulus, only about $20 billion of money was handed out for infrastructure projects.
"I think we'll see a lot more stimulus money get into actual contracts and actual hiring in 2010 than we did in 2009," said Kenneth Simonson, chief economist of the Associated General Contractors of America.
The ramped-up stimulus spending in 2010 will contribute 1.4 percentage points to gross domestic product growth this year, said Brian Bethune, chief U.S. financial economist for IHS Global Insight.
But Mr. Bethune says that may not translate into significant improvement in the unemployment rate, a growing political threat for the administration and congressional Democrats.
Infrastructure spending "doesn't really have a big impact on net employment, simply because a lot of the activity is mechanized," he said. "We should be careful of how many jobs we expect to be created from that."
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Many signature projects—including $20 billion for doctors to create electronic medical records, $4.5 billion for an energy Smart Grid and $7.2 billion for broadband networks—are still in their very early stages.
Vice President Joe Biden will announce his own projections of the stimulus plan's progress in a meeting with the president Wednesday. A senior administration official said ahead of the release of Mr. Biden's report that the increase in the pace of infrastructure projects was expected to cause stimulus spending to "shift more towards private sector job growth."
Spending by state and local governments has about the same effect as spending in the private sector, and not cutting a job has a similar macroeconomic impact to creating a new one, said Edward McKelvey, a senior economist at Goldman Sachs. "Most economists, if they're being economists rather than trying to make some sort of normative point about which way they'd like to see the money spent, would tend to recognize" that, he said.
The number of jobs linked to stimulus spending has been the subject of partisan dispute for much of the past year.
Recipients of stimulus money say they are currently funding the jobs of about 595,000 people. But the White House has also said that as many as two million jobs have been supported directly or indirectly by stimulus money.
Republicans have questioned those numbers and pointed to the rise in the unemployment rate since Mr. Obama took office to bolster their case that the stimulus has failed to deliver on the administration's promises.
Government data indicate that most of the jobs supported by stimulus spending belonged to public employees at the state and local level, including about 325,000 teachers and school staff.
Subsidizing those jobs avoided layoffs, or state and local tax increases that could have further undermined the economy. But they didn't result in substantial hiring of people who had lost private-sector jobs.
State officials already are warning that job cuts could be in the offing in 2011 once the stimulus money runs out.
Of the $179 billion in stimulus funds paid out last year, $112 billion has gone out in the form of large checks to state governments to plug holes in school, Medicaid and unemployment-benefits budgets, or to increase funding for established programs, such as food stamps, according to a Wall Street Journal analysis.
An additional $700 million was spent on administration, and about $47 billion has left Washington in transfer payments, such as $250 checks for Social Security recipients. Social spending totaling $70 billion is also in the pipeline already, including grants for local organizations carrying out jobs-training programs.
Write to Louise Radnofsky at louise.radnofsky@dowjones.com
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