Is stimulus plan working? The arguments pro and con.
The Obama administration said in a report Wednesday that its stimulus plan is working to bolster economy, but Republicans fired back that Americans aren't feeling what Vice President Joe Biden calls a "summer of recovery."
"The Recovery Act has played an essential role in changing the trajectory of the economy," concluded the report, a quarterly assessment prepared by the White House's Council of Economic Advisers. "It has raised the level of GDP substantially relative to what it otherwise would have been and has saved or created between 2.5 and 3.6 million jobs as of the second quarter of 2010."
Mr. Biden, named by President Obama to lead implementation of the act, unveiled the report in a morning appearance.
Many Americans are skeptical about whether the American Reinvestment and Recovery Act of 2009 is really helping. In a CBS News poll this week, 56 percent of respondents said the stimulus hasn't had an impact on the economy, and 18 percent said it has made things worse. Just 23 percent said it has made the economy better.
And, in a shift since April, the CBS poll found that, when asked to choose between two options, slightly more Americans (47 percent) favor reducing the federal deficit than spending more federal money to create jobs (46 percent). Three months ago the poll found 42 percent opting for deficit reduction and 50 percent for spending on jobs.
"Clearly, Obama’s stimulus plan failed to work as you predicted," Rep. Kevin Brady (R) of Texas said in a statement Wednesday, speaking to Christina Romer, chair of the Council of Economic Advisers (CEA), at a congressional hearing. "Instead, this recovery has been unusually weak for one after a severe recession."
The dueling messages reveal that, more than a year after the Recovery Act was signed into law, debate about it is as hot as ever. Here's a look at some of the pro and con arguments:
Criticism: The White House uses Rosy numbers. The report by the White House CEA shows a tally of stimulus-related jobs that is higher than what many private forecasters believe. And, critics say, even those private forecasters may be wrong, because most of them draw their numbers from models that may or may not be right about how the economy works. For each of past four quarters, the two job estimates offered by the CEA are toward the high side of alternative forecasts, several of which are also shown. In the quarter just ended, the CEA estimated is that the Recovery Act may account for as many as 3.6 million jobs in the US; the highest private-sector estimate put that number at 2.3 million.
Counter: No, it doesn't. The CEA says its estimates are reasonable, based on modeling the economy or on comparing reality with a projection of what would have occurred without stimulus. The report shows that White House estimates of the "multiplier" effect – the way that a new dollar of federal spending affects wider economic activity – are similar to what many private-sector forecasters say.
Criticism: The job market hasn't improved. Republicans point to the overall decline in jobs – some 3.3 million have been lost in the private sector – since Mr. Obama signed the Recovery Act in February 2009. Congressman Brady and other stimulus-bashers also say the Obama administration back then was forecasting that passing the act would keep the jobless rate from rising beyond 8 percent. Instead, it rose to 10 percent and remains nearly that high, with minimal private-sector job growth in the most recent month.
Counter: Yes, it has. Ms. Romer says the job market turned out to be much worse than she and other forecasters realized early in 2009, for reasons that had nothing to do with the Recovery Act. Without the act, she argues, the job picture would be even worse. And although the nation's overall stock of jobs stands below where it was at the start of 2009, the monthly trajectory has improved significantly – with steep losses graduallly diminishing and then turning into monthly gains as the calendar ticked into 2010.
Criticism: The stimulus is too big. If foes of the Recovery Act are right that it's not helping the economy, this argument would seem to makes sense. After all, the $787 billion act is adding mightily to the national debt at a time when that debt is already high, and when federal deficits appear untamed. And ultimately, the advocates of this view say jobs come from the private sector, not the government.
Counter: The amount of stimulus may actually be too small. Supporters of stimulus agree that federal deficits will need to be curbed in the long run – perhaps even starting within a couple of years. But they say the recession left a huge hole in economic demand – as unemployment, pay cuts, and lost wealth caused consumer spending to retrench.
Although Romer's report called the act the "boldest" stimulus effort in US history, a sizable portion of the money won't be spent by the end of this year. And some $68 billion of the money goes to patching the "alternative minimum tax" (AMT) – something Congress presumably would have done even if there were no recession. Moreover, though the Recovery Act adds to federal spending, it comes as state governments are cutting their budgets.
So goes the stimulus and jobs debate. With fall congressional elections drawing closer, voters will soon get to render their own verdict.
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