The party that still thinks the Bush tax cuts (which resulted in the most negligible job creation in decades) and the Iraq War (which resulted in the Iraq War) both worked wants you to believe that the stimulus failed. And they’ve been making that argument since before the American Recovery and Reinvestment Act even had a chance to work.
This strategy of asserting — despite all the evidence — that the president’s first major accomplishment did not succeed was so successful in the 2010 elections that Republicans are still doing it five years later on the anniversary of the law’s signing, and few Democrats are willing to stand up for the effort that helped blunt the worst of the financial crisis.
“The standard Republican talking point is that it failed, meaning it didn’t reduce unemployment,” economists Betsey Stevenson and Justin Wolfers wrote in 2012. “Yet in a survey of leading economists conducted by the University of Chicago’s Booth School of Business, 92 percent agreed that the stimulus succeeded in reducing the jobless rate. On the harder question of whether the benefit exceeded the cost, more than half thought it did, one in three was uncertain, and fewer than one in six disagreed.”
And beyond rescuing the economy from a greater depression, the stimulus helped remake America, as Time‘s Mike Grunwald explains in his must-read narrative of the law’s enfolding, The New New Deal: The Hidden Story of Change in the Obama Era. With lots of help from Grunwald — whose most recent reflections on the law appear in “5 Years After Stimulus, Obama Says It Worked” — here are five ways the stimulus saved and remade America’s economy when we needed it most.
It Reversed America’s Layoff Crisis
If you come across someone who says that the stimulus did not work, ask for an explanation of this chart.
What happened in mid-2009 that suddenly boosted America out of recession and reversed the escalating trend of layoffs, which is measured here with the four-week moving average of initial unemployment claims that simply averages the number of Americans applying for jobless benefits?
Was it the uptick of people buying tricorn hats or purchasing signs to call Obama a socialist/fascist/corporate cronyist?
Or maybe it was the result of markets calmed by government intervention infused with the sudden burst of spending via the only place from which it could come in such a crisis, the federal government?
It Led To The Creation Or Saving Of 9 Million Jobs
Based on a new White House report that presents its biased but substantiated view, the stimulus appreciably added to an economic recovery, even though the magnitude of the crisis was much greater than economists predicted when the law was conceived. Grunwald explains:
…the Recovery Act increased U.S. GDP by roughly 2 to 2.5 percentage points from late 2009 through mid-2011, keeping us out of a double-dip recession. It added about 6 million “job years” (a full-time job for a full year) through the end of 2012. If you combine the Recovery Act with a series of follow-up measures, including unemployment-insurance extensions, small-business tax cuts and payroll tax cuts, the Administration’s fiscal stimulus produced a 2 percent to 3 percent increase in GDP in every quarter from late 2009 through 2012, and 9 million extra job years, according to the report.
It Virtually Created America’s Green Energy Industry From Nothing
The most untold part of the untold story of the stimulus is the dramatic way it nearly conjured a vibrant green energy industry that barely existed five years ago. Republicans like to play up the failure of Solyndra and other alternative energy firms that received loans. But the success rate of those investments was far beyond what was expected and the net result is astounding.
“The Recovery Act jump-started clean energy in America, financing unprecedented investments in wind, solar, geothermal and other renewable sources of electricity,” Grunwald wrote. “It advanced biofuels, electric vehicles and energy efficiency in every imaginable form.”
The White House report summarizes those successes with two bullet points:
- Provided the Advanced Research Projects Agency-Energy (ARPA-E) with an initial appropriation of $400 million, to begin researching transformative energy technologies such as second-generation biofuels, more efficient batteries, superconducting wires, and vehicles powered by natural gas.
- Boosted federal funding to renewable wind, solar, and geothermal energy as well as leveraging private dollars to help increase wind electricity net generation nationwide by 145 percent, and solar thermal and photovoltaic electricity net generation by more than fourfold from 2008 to 2012.
Photo: Oregon Department of Transportation via Flickr
It Improved Our Crumbling Infrastructure
Future historians will look back at the sad shape of America’s infrastructure, the millions out of work and the incredibly low interest rates and wonder what Congress was thinking — after 2010. Investment in public infrastructure briefly skyrocketed because of the stimulus and has nosedived to unprecedented lows since.
In a brief two-year span, though, the Recovery Act led to marked improvements in the public commons.
The White House report cites 6,000 miles of high-performance passenger rail corridors, the cleaning of 1,566 acres for reuse, more than 3,000 water quality infrastructure projects and Clean Water projects, 110,000 miles of broadband infrastructure, improvements to 42,000 miles of roads and repairs to 2,700 bridges.
America’s Recovery Is Nearly The Best In The Developed World
Of all the countries in the world that suffered a major banking crisis, only America and Germany have recovered more than 100 percent of their pre-crisis gross domestic product. Germany’s strong labor movement, innovative educational system and unique work-sharing policies helped keep consumer demand from dwindling excessively. In the U.S., the stimulus helped make up for the dramatic cuts at the state and local levels while providing stealth tax breaks that kept consumer spending from completely cratering. More could have been done, but a bigger stimulus was a political impossibility, as Grunwald describes in his book.
Five years later, the right’s best arguments against the stimulus are that it didn’t meet goals established before the extent of the crisis was known and it cost too much. But the actual cost may end up being zero.
“The Recovery Act had at most a minimal impact on the long-run debt—and the additional growth it produced likely further reduced or eliminated its cost,” the White House reports.