The Stimulus Worked — But for Which Party?

By Tom Curry
|  Monday, Oct 25, 2010  |  Updated 3:30 PM PDT
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The Stimulus Worked — But for Which Party?

AP

Obama discovered only belatedly that "there's no such thing as shovel-ready projects."

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Forecasting models and eminent economists say the stimulus worked. The unemployment rate and the dismal Democratic poll numbers say it didn't.

The $814 billion stimulus — or American Recovery and Reinvestment Act — plays a far bigger role in Republican ads this year than in Democratic ads, a sure sign of which party thinks it benefits politically from a debate over the spending package.

President Barack Obama himself seems to have some doubts about the 2009 stimulus bill in retrospect, telling the New York Times in a recent interview that he'd discovered only belatedly that "there's no such thing as shovel-ready projects."

In many parts of the country, voters can't see the new roads, bridges and tunnels that they thought they'd been promised. 

That's largely because only about 14 percent of the stimulus money in fiscal year 2010 was spent on transportation projects, according to the most recent report from the Government Accountability Office, the fiscal watchdog for Congress.

The GAO reported that nearly 70 percent of the stimulus money went to state Medicaid programs for the poor and public schools.

One Democrat who wasn't in Congress to vote on the stimulus but who's now running for the House says he would have done it differently. Denny Heck, who is running for an open seat in Washington state, said, "Don't confuse me with somebody that thinks that Congress has done this in a really good way. I don't."

"It's not targeted," he said. "There's not a close enough tether between these investments and high unemployment areas." Still, Heck defends the stimulus projects in his area and says he sees the need for infrastructure spending.

Heck is running against Republican Jaime Herrera in Washington's 3rd Congressional District, currently held by Democrat Brian Baird. The race is rated a toss-up by the NBC News political unit.

A tough sell
The national jobs picture explains why some Democrats now treat the stimulus as an unlovable stepchild.

When Obama signed the Recovery Act into law in February 2009, the unemployment rate was 8.1 percent and there were 12.5 million unemployed Americans.

In September, 17 months later, the unemployment rate was 9.6 percent and there were 14.8 million unemployed.

Those numbers almost make the Republican attack ads write themselves. A new Club for Growth television spot running in Pennsylvania goes after Democratic Senate candidate Rep. Joe Sestak by saying he "voted for Obama's $700 billion stimulus, and unemployment rose."

(The non-partisan Congressional Budget Office says the cost of the stimulus will be $814 billion, not $700 billion.)

"The failed stimulus" has become the Republican mantra. In an ad attacking Democratic Rep. Raul Grijalva, Republican Sen. John McCain said "Arizonans are struggling, yet Raul Grijalva voted for the failed stimulus..."

The nonpartisan Cook Political report rates Grijalva's race against Republican Ruth McClung a tossup.

Some Democrats have resorted to the argument of how much worse things might have been.

In a recent debate, Florida Republican Senate candidate Marco Rubio said the stimulus had "failed miserably." But Democrat Rep. Kendrick Meek and independent candidate Gov. Charlie Crist both defended the stimulus, saying it saved teachers and police officers from losing their jobs. 

"If we didn't take that money, about 80,000 of our fellow Floridians would be out of work today, not receiving a paycheck, not being able to put food on the table for their family," Crist said.

"People have been hurting and I understand that," Senate Majority Leader Harry Reid told MSNBC's Ed Schultz last week. "And it doesn't give them comfort or solace for me to tell them, you know, but for me, we'd be in a worldwide depression."

First-term Rep. Dina Titus, Reid's fellow Nevada Democrat, said last week in a debate with her GOP opponent Joe Heck, "Look at the jobs that have been created ... Do we need to do more? And do we wish it were faster? Yes, but let's not forget a lot of that money got held up at the state level when the governor (Republican Jim Gibbons) didn't get it out fast enough."

A needed boost
Many economists and number-crunchers tend to agree with the Democrats' argument that the economy would be in more perilous straits had no stimulus been enacted.

The CBO said its economic models indicate the stimulus increased the number of jobs by as much as 3.3 million in the second quarter of 2010 and cut the unemployment rate by as much as 1.8 percentage points.

At a Senate Budget Committee hearing, University of Maryland economist Carmen Reinhart, an expert on the slumps that follow financial crises, said that without the stimulus, "We would be doing much worse."

"We don't know what the counterfactual (would be)," she said. "We know that at the time in the fall of 2008, worldwide confidence shattered. And the stimulus package played an enormous role, not just the stimulus package in the United States, the stimulus packages (in other nations) that went into effect in different orders of magnitude, in restoring confidence."

Massachusetts Institute of Technology economist Simon Johnson told the budget committee, "I would give the stimulus a very positive assessment. I'm not a fan of stimulus in general, but I think this was a very unusual set of circumstances. I think it saved jobs, and I think it prevented damage to potential output that you would have seen otherwise ... The medium-term prospects would have been much bleaker for this country."

But things are still bleak, especially in Michigan, California and Nevada (the state with the highest jobless rate).

"I'm not an economist, but I know what I see," said Joe Heck in his debate with Titus. "The stimulus was sold by saying unemployment would not go higher than 8 percent ... Nearly 100,000 Nevadans have lost their jobs in the last two years."

In May, the Greek sovereign debt crisis caused a plunge in global financial markets, giving Republicans a new talking point. America's national debt is now higher than it has ever been except during the World War II.

Stimulus means debt; more debt opens the way to a sudden fiscal crisis.

The CBO agreed: in a report in July it warned that a growing debt "would increase the probability of a sudden fiscal crisis."

The debt worries made it politically difficult for Obama to get Congress to approve a new stimulus, although it passed a $30 billion lending plan to spur local banks to loan to small businesses.

When Obama signed the stimulus bill into law last year he called it "the largest new investment in our nation's infrastructure since Eisenhower built an Interstate Highway System in the 1950s. Because of this investment, nearly 400,000 men and women will go to work rebuilding our crumbling roads and bridges ... building high-speed rail lines that will improve travel and commerce throughout our nation."

By September 2010 he was calling for a new $50 billion infrastructure plan, which seemed to imply that the Recovery Act hadn't been large enough.

"It doesn't do anybody any good when so many hardworking Americans have been idled for months, even years, at a time when there is so much of America that needs rebuilding," Obama said on Sept. 6. "That's why today, I am announcing a new plan for rebuilding and modernizing America's roads and rails and runways..."

In a sign of the times, White House spokesman Robert Gibbs was careful to not call the new proposal a "stimulus."

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