This past week marked the fifth anniversary of the American Recovery and Reinvestment Act, known colloquially as President Obama’s stimulus package that passed shortly after he was inaugurated in 2009. Half a decade ought to provide enough perspective to determine whether or not the program has been a success. Your opinion on the subject, however, seems to depend on whom you believe.
For its part, the White House’s own Council of Economic Advisers (CEA) said that the stimulus saved between 6 million and 9 million jobs and that America’s gross domestic product (GDP) would have been two to three points lower in the first two years after its passage than it would have been otherwise.
The problem with those numbers is that they’re based on assumptions that are very difficult to objectively verify. How does one determine which jobs would have disappeared in the stimulus’ absence? If we are to have confidence in weighing the value hypothetical scenarios of what might have been, we ought to measure those predictions against the projections made before the stimulus was passed.
The White House confidently asserted that passage of the stimulus would keep unemployment below 8 percent and would be immediately injected into the economy by means of a huge number of “shovel-ready projects” designed to rebuild the nation’s infrastructure. The reality was that unemployment soared to 10 percent by October of 2009 and stayed above the 8 percent threshold until September of 2012, and even the president was forced to admit that "shovel-ready was not as shovel-ready as we expected."
It’s no surprise, then, that others take a dimmer view of the stimulus’ success. In 2011, two university economists published a paper at Ohio State University that said that while the stimulus had, indeed, “created/saved 450 thousand government-sector jobs,” it had also “destroyed/forestalled one million private sector jobs,” thereby having a net negative effect on the economy as a whole. They concede, however, that there is “appreciable estimation uncertainty associated with these point estimates.”
The one thing that is indisputable, however, is that the stimulus added nearly a trillion dollars to the national debt, a legacy that remains with us even as we debate its hard-to-define economic benefits. Surely such a massive expenditure ought to have produced undeniably positive outcomes commensurate with its expense. That is not the case, which is the likely reason why the Obama administration has not gone out of its way to call attention to the bill’s ignominious anniversary.