For some time now I've been pulling out what hair I have left over the issue of the $800 billion stimulus passed and signed into law early in 2009. The ever helpful Republicans, after voting NO in lockstep, started telling us that the whole thing was a complete failure. They claimed, as per Econ. 101, that the government can't create wealth or private sector jobs. This was said over and over and over again. Now, after more than a year, the drum beat has changed only to tense. "The stimulus didn't create even one job," said a Republican lawmaker in an interview. "Not even one," he declared.
Now, aside from the obvious fact that outside, nonpartisan, observers have shown that at least 1.2 million jobs were created by the stimulus, the stimulus failed BS is still the GOP talking point. This seeming disconnect from reality just makes my head hurt. Why, you ask? Because history tells a different story.
In the weeks leading up to the passage of the stimulus the GOP and the right wing made reference after reference to the FDR years during the Great Depression. We were told that none of the New Deal projects got us out of the depression. That all those projects failed, just like the Obama stimulus would fail. Time and again we were told that it was only WWII that ended the Great Depression. And then they moved on to all the other bad things that would befall us. They just sort of skipped over why the war ended the economic troubles of a decade. So what was the magic of the war?
Deficit Spending! That's right, the government needed all manner of war related products, from Victory Ships to Spam. The nasty old government spent huge amounts of borrowed money to arm for and then fight a two front war. In fact, the spending as a share of Gross National Product was far higher in the war years than it is today. And it was almost all on borrowed money. Did the war deficit spending, then, create any jobs or wealth? Both, of course, in spades. Entire industries were expanded (aircraft manufacturing) or created (atomic energy, radar, computers) during those years. This simple fact is that when a government spends money to buy things, even things that have a short lifespan like bullets and bombs, that spending creates jobs in the private sector and profits for businesses.
To listen to the GOP one would think that such an idea is just crazy talk. That position reminds me of the folks who think that NASA and space flight are a huge waste of tax dollars. They act as if the capsules are stuffed full of hundred dollar bills that are then ejected into space in a giant paper cloud. Sorry folks, all the billions spent on space flight went to actual businesses and people.And the long term benefits to society go far beyond Tang. So how do these historical facts fit into the current debate over stimulus spending? And why does my head hurt when I hear that the stimulus failed?
Well, the answer to the second question came this weekend in a column by George Will that appeared in our local paper last Sunday. In describing all that was wrong with the stimulus Mr. Will offered that, if the stimulus had worked then unemployment would now be less than 8%. And it hit me like a lightning flash. The people claiming stimulus failure weren't actually looking at the type of spending or the long term effects of dollars of stimulus not yet spent. They were, and are, only pointing to the claim made by a member of the Obama administration that the stimulus would keep the rate of unemployment under 8%!
That's it. That's the whole argument. Somebody made a too low estimate of the effect of the stimulus and since that wasn't met, the whole thing was a failure. Had the administration predicted that the law would keep unemployment under 12 or 13 percent, the insane position that stimulus failed would itself be seen as a failure. But, they didn't so now we are subjected to pundit after pundit mouthing the same claim. Stimulus failed because the rate is over 8%. Period. Nothing else need be said.
The only thing I can do now for my mental health is, every time I hear or read this stimulus failed crap, I say to myself, slowly and with feeling "Mission Accomplished." See, sometimes they make predictions that are wrong too.