Economic Stimulus: Is It Working One Year Later?

The stimulus package turns one today. Happy Birthday!

Has it been a success? On the macroeconomic level, it's too soon to tell. Yes, White House economics adviser Christina Romer last month said that employment was 1.5 million to 2 million higher because of the stimulus. And you don't have to take it from the White House, David Leonhardt recently wrote in the New York Times: "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."

On the other hand, the stimulus has been quite successful on a political level—even if the polls don't necessarily show it. Remember, it was essentially a Democratic undertaking. Every Republican member of the House and all but three Republican members of the Senate voted against it. And since its passage there have been continued calls for its repeal or for halting. But what precisely are they objecting to? Again, look to Recovery.gov. The biggest single chunk of the stimulus was tax cuts—$288 billion.

Second, in the wake of the bill's passage, Republicans stood up as one to say that the stimulus would fail (at least the non-tax-cut part of it) because it was axiomatic that government spending could not create any jobs—never did, can’t won’t. As Michael Steele put it: "Let's get this notion out of our heads that the government can create jobs. Not in the history of mankind has the government ever created a job." 

Of course, that argument was wrong in theory—and in practice. In the intervening months, Republicans have essentially debunked their own argument. As President Obama noted in his State of the Union address, many Republican members of the House and Senate who voted against the stimulus on economic, political, and philosophical grounds rushed to take part in ribbon-cutting ceremonies for projects funded by the stimulus bill. More recently, reporters and commentators have noticed that many of the Republicans who voted against the stimulus (on the grounds that it couldn't create jobs) have since petitioned government agencies on behalf of their states and districts to get stimulus funds—on the grounds that it would create jobs. (Rachel Maddow of MSNBC had a particularly good listing of the culprits here.)

That leaves the third leg of the stimulus stool: entitlements. Much of the spending in this area has been on Medicaid—an effort to help state governments, run by Democrats and Republicans alike, cope with the rising costs of residents left uninsured or underinsured by the economic downturn. And it's very difficult to find anybody—in the health-care industry or in state or federal politics—who argues that we'd be better off if state and federal health care programs have less money to spend. In fact, it's become an article of faith for Republicans that spending on Medicare can't be reduced in any way, shape or form.

So in the year since the stimulus bill was passed, it's been more difficult for opponents to make the case against the components of the package. And here's the kicker. As much as its impact has been debated and discussed, the stimulus has barely kicked into gear. The package was designed to be rolled out over a three-year period, in part because of logistics (it's tough to approve tens of billions of dollars of loan guarantees to wind-energy farms and solar power arrays in a matter of a few months), and in part because of politics.

Recovery.gov shows precisely how much has been budgeted and how much has been spent on tax breaks, new spending, and entitlements. It's not mentioned as much, but while Congress' horizon extends only as far as November 2010, the Obama administration is looking ahead to November 2012. While Congressional Democrats would have preferred an extremely strong shot of adrenalin that would produce results in a matter of months, the White House isn't particularly troubled by the notion that large chunks of the stimulus won't hit the economy until 2011. Thanks to the stimulus bill, there's still $515 billion—in the form of tax cuts, contracts and loans, and aids to entitlement programs—set to enter the economy in the next two years. That will serve as a powerful contributor to growth in 2010 and 2011.

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