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June 2012
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NO PARTY Anniversary of stimulus was nothing to celebrate

Monday marked an ignominious anniversary for those who believe the budget deficit and scope of government are out of control. It was the fifth anniversary of the 2009 American Recovery and Reinvestment Act, better known as the stimulus program.

The day was marked by the release of a White House report declaring the stimulus a rousing success - a viewpoint that naturally drew fire from the program's many critics in Congress and elsewhere.

The White House, in a 70-page report (government can't make anything simple) said the $830 million combination of spending and tax breaks "created or saved" 1.6 million jobs a year for four years and raised the country's gross domestic product between 2 and 3 percent between late 2009 and mid-2011.

Those conclusions are of course dubious. One thing the stimulus clearly did do was set the nation on the path to a succession of trillion-dollar deficits that put President Obama on course to preside over a doubling of the national debt during his tenure.

But as James Freeman notes in a column on The Wall Street Journal online, the massive spending package was promoted to the public as a means to keep unemployment from rising above 8 percent. Instead, Freeman writes, unemployment averaged more than 8 percent for four straight years after the program was implemented, and it would have been even worse if so many people had not left the workforce altogether, dropping the labor participation rate to levels last seen in the 1970s.

Freeman also points out that the money was promoted as being for infrastructure improvements - the president's so-called "shovel ready" jobs - but in the end only 10 percent of the money went there. Instead billions were poured into the government and education sectors, where unemployment already was low.

Freeman also recites some of the more appalling uses of the money (all of which was essentially borrowed) such as a $730,000 study of why young people use malt liquor and marijuana, $219,000 for a study of college student "hookups", and $92,000 to the Army Corps of Engineers for costumes of mascots such as Bobber the Water Safety Dog.

For all of this, Freeman says, the economy got 18 quarters of growth that averaged 2.4 percent versus 4 percent in the Reagan recovery of the 1980s and almost 4 percent during the 1990s.

As for the White House claims that the spending spree boosted GDP by 2 to 3 percent, that doesn't square with a 2012 estimate by the non-partisan Congressional Budget Office that the stimulus probably boosted GDP between as little as one-tenth of a percent and at best eight-tenths of a percent. Likewise the CBO estimates the unemployment rate was lowered by as little as one-tenth of a percent and as much as six-tenths of a percent by the program.

Even if one were to accept the high ends of the CBO estimates, it is hard to reach any conclusion other than that the stimulus did more harm than good. It boosted annual government outlays from less than $3 trillion to $3.5 trillion in one year, and federal spending has essentially remained at that level ever since. Meanwhile, the nation continues to endure high joblessness, enormous workforce displacement, and the slowest growth of any economic recovery in modern history.

Part of that record is almost certainly the result of other bad White House policies, such as higher taxes, the cost fears created by Obamacare, and record-setting regulatory rulemaking. But any way you slice it, the five-year anniversary of the president's stimulus program was nothing to celebrate.

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