you're reading...
economics, politics

Renewed criticism over the stimulus, despite the fact that it worked!


President Obama received renewed criticism for the American Recovery and Reinvestment Act, also known as the “stimulus,” from conservative speakers at the RNC.  Paul Ryan led the criticism during his speech.  He said, “The stimulus was a case of political patronage, corporate welfare, and cronyism at their worst. You, the working men and women of this country, were cut out of the deal.”  He continued, “What did the taxpayers get out of the Obama stimulus? More debt. That money wasn’t just spent and wasted — it was borrowed, spent and wasted.”

This isn’t the first time that conservatives have attacked the President’s stimulus.  The consensus among Republicans considers it a failed policy.  However, the consensus among economists tells a very different story.

According to a study done by the University of Chicago Booth School of Business 80% of economic experts agree that the unemployment rate was lower at the end of 2010 than it would have been otherwise without the stimulus.  Only 4% disagreed or strongly disagreed.

Below is a chart from the study illustrating the results.

The results are even sharper when weighted by expert’s confidence.  Still not convinced?  Then, lets look at the data.

Below is a chart of real GDP growth.

Growth was historically negative in 2008.  Notice, however, that growth quickly returned to positive numbers after the stimulus took affect.  Some may say this is just coincidence, but what makes it not coincidental is the economic contraction in late 2010 – this is when the money for the stimulus faded out.  In other words, the economy expanded with stimulus and contracted without it.  In fact, the CBO’s analysis says that it added 3.3 million jobs as well as prevent the nation from slipping back into recession

It works like this: A recession is simply a contraction in the economy; sales drop, production slows, unemployment rises, and consumerism falls.  Essentially the flow of money slows down because people stop spending it.  If no one buys anything, the economy tanks.  However, government spending can compensate for a lack of consumer spending and keep money flowing.  In actuality, spending of any kind, including government spending, boosts GDP.

Below is a chart from the Center on Budget and Policy Priorities illustrating what GDP would have been without a government stimulus.

Charts and graphs aside, I want to direct you to an article in the Huffington Post that shares personal stories of people who benefited from the stimulus.  The authors, Sam Stein and Arthur Delaney, took an interesting angle and revealed that a number of stimulus recipients had no idea that they received money from the controversial law.

From the article:

The Huffington Post reached out to a dozen stimulus recipients in the Tampa area near the Republican convention to see how the bill affected them. Of those who agreed to talk about it, only one initially knew that they’d received any stimulus money.

The article continued to talk about specific cases, such as Jay Catalani:

Jay Catalani didn’t know the $22,550 contract he received to electrify water meters inside veteran cemeteries throughout Florida came from the government.

(…) “Nobody explained the stimulus and nobody explained the health care bill,” Catalani said. “It should have been just literally peeled through like an onion and it wasn’t.”

And yet, the stimulus has had a lasting impact on Catalani’s company, which now has 12 workers. “I ended up adding two employees,” he said. “I didn’t know it was a stimulus, but it stimulated my company. And I still have them today. Even though it was only $20,000, but … we were right on the cusp of, ‘Hey, should we bring more people on or shouldn’t we?’ We brought two guys on and ended up keeping those two people.”

The article covers other stories of Tampanians who learned that they benefited from the stimulus.  It makes you wonder how many critics of the stimulus attending the RNC unknowingly felt the positive impacts of it.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: