Flush With Stimulus Cash
The White House offers a white wash on the record of the "stimulus."
The American Recovery and Reinvestment Act, a.k.a. the “stimulus,” turned five yesterday, and the Obama administration is in full spin mode. White House Council of Economic Advisers Chairman Jason Furman wrote Monday, “[T]he Recovery Act had a substantial positive impact on the economy, helped to avert a second Great Depression, and made targeted investments that will pay dividends long after the Act has fully phased out.” Not only that, but it was free! “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.”
If you believe any of that, to paraphrase the classic George Strait song, we’ll sell you some oceanfront property in Arizona.
First, Barack Obama and his administration told us that blowing $800 billion would save the economy, but in reality it didn’t do much in the way of stimulating recovery. GDP growth has averaged just 2.4% since the stimulus, which compares poorly to the Reagan recovery average of more than 4% growth. Ronald Reagan, by the way, oversaw that recovery without a massive pork-binge “stimulus.”
Second, the administration promised that the “stimulus” would keep headline unemployment below 8%. As we have noted numerous times in this space, headline unemployment is a deceptive number because it ignores those who have given up looking for work. That’s key when reviewing the stimulus because millions of Americans have left the workforce, and that’s the main reason headline unemployment has decreased. And it didn’t stay below 8% as the White House promised but reached a high of 10%. In fact, unemployment remained above 8% for four straight years. The White House insists that the stimulus “saved or created” an average of 1.6 million jobs per year, but claiming that federal spending is the primary vehicle for job creation is absurd. By the way, Americans still view unemployment as the most important problem facing the country.
Finally, the “stimulus” drove annual federal deficits well above $1 trillion for four consecutive years, taking us further down the road to insolvency – the national debt now stands above $17 trillion. What was sold as $787 billion in spending ended up being about $830 billion thanks in part to some serious waste and graft for Democrat constituent groups. The “stimulus” also set a new minimum for federal spending, meaning that Democrats can now run around crying that returning to pre-stimulus spending levels is a draconian “cut.”
Increased federal spending failed to truly stimulate the economy because of this fundamental truth: The government does not generate wealth, it only confiscates and redistributes it. Every dollar the government spends is a dollar taken from the private sector. Obviously, the government has legitimate expenditures, but “stimulating” the economy clearly isn’t successful or authorized by the Constitution.