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Originally published February 17, 2014 at 4:53 PM | Page modified February 18, 2014 at 7:54 PM

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White House defends stimulus law, but GOP says it hasn’t worked

President Obama will mark the fifth anniversary of signing the American Recovery and Reinvestment Act this week as his Council of Economic Advisers issued a 70-page report lauding the law’s impact.


Tribune Washington Bureau and The Associated Press

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WASHINGTON — Five years after its passage, White House officials and their Republican critics are still fighting over the merits of President Obama’s economic- stimulus law.

Later this week, Obama will mark the fifth anniversary of signing the American Recovery and Reinvestment Act. Monday, his Council of Economic Advisers issued a 70-page report lauding the law’s impact. Republicans, meanwhile, seized the anniversary to denounce the law for increasing the federal debt while failing to cure the economy’s troubles.

The dispute underlines how important the economic-stimulus plan remains to the central battle between the two parties — the role of government in the economy.

As told by Democrats, the stimulus law is a tale of officials using government effectively to shield families from a severe economic crisis triggered by inadequately regulated speculation. In that accounting, the law is a prime example of how a strong central government can help the average person.

White House economic adviser Jason Furman said the American Recovery and Reinvestment Act made other targeted investments that will pay dividends for years to come.

To Republicans, by contrast, the law provides proof that government spending does little other than to burden future generations with debt.

Given the continued weakness in the economy, Republicans have the simpler case to make: Good times have not yet returned, therefore, Obama’s policies have failed.

Florida Sen. Marco Rubio demonstrated the approach in a videotaped message, which he opened by referring to the anniversary of the “failed stimulus program.”

“Five years later, underemployment is still too high, the number of people that have dropped out of the workforce is astounding, unemployment remains stubbornly high and our economy isn’t growing fast enough,” Rubio said.

“The ‘stimulus’ has turned out to be a classic case of big promises and big spending with little results,” House Speaker John Boehner, R-Ohio, said in a written statement. “Five years and hundreds of billions of dollars later, millions of families are still asking ‘Where are the jobs?’”

Senate Minority Leader Mitch McConnell, R-Ky., argued that Obama could put the nation’s finances on a more solid footing and create jobs by taking steps to roll back regulations and finally approve the Keystone XL pipeline project from Canada to the Gulf of Mexico.

“Five years later, the stimulus is no success to celebrate,” McConnell said. “It is a tragedy to lament.”

As White House officials see it, that argument is not just simple, but simplistic. Financial crises like the one that hit the U.S. in the final year of George W. Bush’s tenure inflict long-term damage on an economy, they note.

Comparing policy outcomes with an ideal result — a rapid, sustained recovery that quickly restores the economy to health — poses an impossible test. The correct approach is “comparing what actually happened with what might have happened,” the report from the economic advisers says.

By that standard, the stimulus law succeeded because it “helped avert what might have become a second Great Depression and paved the way for stronger economic growth,” they say. While economic growth still lags behind what most Americans would like, the U.S. economy has recovered more quickly than many major competitors, including Great Britain and France and pretty much on parallel with Germany, they note.

Half of the total fiscal support for the economy, or about $689 billion, from the recovery act and subsequent measures was in the form of tax cuts directed mostly at families. The remainder was spent on such things as rebuilding roads and bridges, preventing teacher layoffs and providing temporary help for people who lost their jobs or needed other assistance because of the poor economy.

More than 40,000 miles of roads and more than 2,700 bridges have been upgraded, nearly 700 drinking water systems serving more than 48 million people have been brought into compliance with federal clean water standards and high-speed Internet was introduced to about 20,000 community institutions.

“While these figures are substantial, they still nevertheless understate the full magnitude of the administration’s response to the crisis,” Furman wrote.

He noted that the report focused solely on the effects of fiscal legislation. It did not evaluate other administration policies that aided the recovery, such as stabilizing the financial system, rescuing the auto industry and supporting the housing sector.

Overall, the report said, the stimulus law and subsequent economic policies had increased employment by about 1.6 million jobs a year through the end of 2012 and had increased economic output by between 2 and 3 percentage points.

That’s consistent with a previous estimate put out by the nonpartisan Congressional Budget Office, which estimated that in 2010, the year of its biggest impact, the stimulus law had increased output by between 0.7 and 4.1 percentage points. The law also kept the poverty rate from rising significantly, despite the depth of the recession, the report noted.

The report also disputes the Republican claim that the stimulus law added significantly to the government’s long-term debt.

The law increased spending by about $805 billion through the end of fiscal year 2013.

But given the amount of money the government is expected to borrow over the next 75 years, primarily to finance Social Security and Medicare benefits, that added spending to help the economy recover would add “less than 0.1 percentage point” to the debt burden, the report states.

Furman said the economy is “undoubtedly in a stronger position” because it has grown for 11 straight months, although not at a pace that would be considered robust. Businesses have also added 8.5 million jobs since early 2010. Obama initially sold the stimulus as an investment that would produce a dramatic decrease in unemployment that ultimately did not materialize.

Unemployment remains high, at 6.6 percent in January, though it has fallen considerably since reaching double-digit highs early in Obama’s administration. Some of the decline, however, is from people dropping out of the workforce. People aren’t considered unemployed if they aren’t looking for work.

Obama planned to discuss the economy Tuesday at a suburban Washington distribution center for the Safeway grocery chain. On Wednesday, Vice President Joe Biden will mark the recovery act’s fifth anniversary during a visit to America’s Central Port in Granite City, Ill.



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