The $800 Billion Deception: The Stimulus Has Barely Started

[Jennicut]

The $800 Billion Deception

Conservatives claim the stimulus has already failed. But it has barely started.

By Daniel Gross | Newsweek Web Exclusive
Updated: 11:59 a.m. ET Oct 13, 2009

From the moment it passed, the $787 billion American Recovery and Reinvestment Act—the stimulus bill—has been the subject of controversy. Many critics have deemed it a debacle, since unemployment has continued to rise in the months since its passage. The Republican Party declared the bill a failure over the summer, and House Minority Leader John Boehner recently deemed it a waste: "You can't spend $800 billion of taxpayer money and not create jobs when you say that's what the goal was." At a dinner several weeks ago, I heard a cable news reporter, one whose job is to report numbers accurately, declare that "we've already spent $800 billion and it was a waste." I suppose it's too much to ask political hacks and TV reporters to get the size and timing of the stimulus package right. But I expect better from my colleagues at the Washington Post editorial page, which on Sunday argued against further stimulus measures because they would add to the scary national debt and because "the government still hasn't run through half of the $787 billion in tax cuts and spending increases enacted this year." (Click here to follow Dan Gross)

To begin with, the stimulus was $787 billion, not $800 billion. (Those of you who think there isn't much of a difference, please make out a check for the difference to Daniel M. Gross.) The more egregious error has to do with the timing. Many critics act as if the entire amount has already been spent. They're completely wrong. Even to argue that it's been half-spent, as the Post, does, is only half-right.

As was planned from the start, in fact, only a small portion of the $787 billion has been spent. The Council of Economic Advisers recently issued a comprehensive report on the impact of the stimulus. "As of the end of August, $151.4 billion of the original $787 billion has been outlaid or has gone to American taxpayers and businesses in the form of tax reductions," the CEA reports. That's 19 percent. If projections made for September expenditures are right, "between one-fifth and one-quarter of the total $787 billion" was spent by the beginning of October.

This is not surprising. The ARRA is divided into six different types of components, from tax cuts to infrastructure investments. Some can be done quickly (cutting and mailing tax rebate checks) while others (building bridges) take longer. "The areas where stimulus has been largest in the first six months are individual tax cuts, state fiscal relief, and aid to those most directly hurt by the recession," the CEA reported. Through the end of August, in fact, tax cuts accounted for $62.6 billion of expenditures, and government investment outlays accounted for only $16.5 billion.

The Obama administration believes the stimulus is working. "There is broad agreement that the ARRA has added between 2 and 3 percentage points to baseline real GDP growth in the second quarter of 2009 and around 3 percentage points in the third quarter," the CEA reports. Given that Macroeconomic Advisers is projecting the economy grew at about a 3 percent clip in the third quarter, it's possible that stimulus activity could have meant the difference between growth and contraction in the just-ended quarter. And far from being out of ammunition, the government still has about 75 percent of the $787 billion Congress appropriated to spend during the next two years. Of course, the debate over whether the stimulus worked will ultimately be settled in 2012—as voters go to the polls and economists crunch the 2011 data. Until then, we should avoid jumping to rash conclusions.

http://www.newsweek.com/id/217358

The stimulus cannot be a failure when most of is has not even been spent. It was designed to be spent over time. One can argue it was too small (and that can be blamed on compromises in the Senate), but not that we should never have had it in the first place.

[Turbineguy]

1. Be that as it may...

what about instant gratification? I need a new Aston Martin right fucking now!

[Jennicut]

2. We ARE an instant gratification country.

[uponit7771]

3. Good fact based article, 10.2 surprised me this morning...I can be more patient now.

[Garam_Masala]

4. Obama is not taking my advice

and spend the stimulus on helping small businesses. Most of the money is going
to big businesses and government. Small businesses create 91% of new jobs.

[AndyA]

5. And we all know what those big businesses are doing with their profits, right?

More bonuses for the hyper wealthy.

More perks, more bonuses, more bonuses...more, more, more. They deserve it because they ran their companies into the ground with greed, but somehow thanks to the American taxpayers they survived. Now they're raising their fees and rates and passing those increases on to the very people who bailed their sorry asses out.

They are being rewarded for their bad behavior.

I agree, small business should have been the focus here. Break up the "too big to fail" companies now and prohibit the executives who oversaw this financial crises from working in the financial industry ever again.

[Garam_Masala]

7. Exactly.....big buisnesses are corrupt and buy off politicians

Whereas according to a recent article on Huff post, 91% of NEW jobs are
created by SMALL businesses.

[Rosa Luxemburg]

14. I would ban all lobbying and sponsorship from big business

I would only accept lobbying from environmentalists, ordinary workers.

[Garam_Masala]

15. One simple step will virtually eliminate corruption of politicians

<<< TERM LIMITS >>>

President is term limited, so are most Governors.

Why not politicians in congress? The longer they stay the more powerful they become and
then they are more valuable to the lobbyists.

Even Judges should serve no more than 10 years.

[Jennicut]

8. Here is a link to the list of the small business tax breaks in the stimulus bill:

http://www.journalofaccountancy.com/Web/SmallBusinessTaxBreaksinStimulusBill

I think we should give money directly to them instead of just tax breaks, however.

[Kdillard]

9. Hasn't Obama said the rest of the tarp money is going to small businsses. At

At least that is what I remember from his announcement a week or two ago

[Garam_Masala]

13. Yes I finally heard that TODAY in the news

And that is indeed very good news!

[OhioBlue]

18. most stimulus money directed toward business

is through grant applications in training, energy efficiency projects, renewable energy innovation, etc. It will go to whomever has the most competitive grant application.

There is also help specifically targeted for small business. visit the SBA website or the recover website and look at the announcements.

[Garam_Masala]

19. May not be the best time to channel money into favored businesses

It is best for the central government to NOT micro-manage which business
needs help. Soviet Union did that, Eastern block countries of Europe tried that,
Nehru's India did that via their 5 year plans. Nothing caused prosperity.

Right now the economy is in dire straits. Jobless rate is 10.2% and closer to 17%-18%
if you count people who have given up looking.

The quickest way to cause economic recovery may be to give SMALL businesses ACROSS
the BOARD help via accelerated depreciation, tax credits for hiring and retaining new
employees and tax credits for employee health insurance (currently they get tax deduction).

After the economy recovers, then it will be a better time to direct help to green
energy and such.

[jonestonesusa]

21. "Central government"?

It's known as the federal government.

And, are you implying that there are no historical examples where federal assistance to business has played a role in economic recovery? Probably the biggest counter-example is the Marshall plan, which was central to post-WWII recovery in Europe. But there are many other examples, whether it's federal assistance for infrastructure and human capital (railroad construction, highway systems, GI Bill) or direct job creation and payments to individuals (WPA, Social Security). To compare all federal assistance to business to a Soviet-style planned economy just doesn't hold up. Obama's as tax credit friendly as a moderate Republican in some ways - he's proposed tax credits for hiring and included a sizable middle-class tax cut in the stimulus package. But it's a fantasy to think that tax credits alone are going to get us sufficient growth to get out of recession. Didn't a recent president named Bush already try that?

Remember, this is DU - supply side purity gets called out here.

[Garam_Masala]

25. I am glad you brought up the Marshall plan

Marshall Plan funds were NOT mainly directed toward feeding individuals or building individual houses, schools, or factories, but at strengthening the economic superstructure, particularly the iron-steel and power industries. Note that those were the industries du jour of that time.

read more at....
http://www.ambrosevideo.com/resources/documents/53.pdf

In other words the money was spent in creating industry with permanent jobs, not projects such as WPA which created
NO PERMANENT jobs. Only creating permanent jobs makes economic sense, especially when we have to borrow money from
China for every dime of stimulus spending since there is no surplus in the federal budget.

The WPA project you mention did not bring us out of depression. Depression lasted almost all of 1930's. World War II
was the real stimulus to get us out of depression. I don't think people today will accept a decade long economic slump.

Since SMALL businesses create 91% of new jobs according to a recent article from Huffington Post, hardly a right wing rag,
91% of stimulus should be directed to small businesses. Instead we have bailed out LARGE corporations such as AIG, GM, CITI,
BOA, Chrysler etc. Larger corporations are corrupt and buy off politicians.

The Bush taxcut was directed at RICH INDIVIDUALS, not tax credits for accelerated depreciation, hiring & retaining employees,
and health insurance credits. I am NOT for taxcuts for individuals.

[jonestonesusa]

29. Another opinion on this subject...a perspective on a success story

in Germany in preventing massive recession, as this country has not. Krugman's view recognizes that multiple stragegies are needed both to stem the cascading effects of job losses - whole communities suffering high rates of foreclosures and a collapse of the tax base - and long term economic development, which combines infrastructure spending, creating the right tax climate for investment and entrepreneurship, and maintaining a social safety net. The either-or thinking is not helpful, in my opinion - I don't disagree that small business is an economic foundation for our country (I operate one myself) or that corporations are corrupt. But the demand side - i.e. everyday people who are suffering from recession - also need to be considered in policy decisions.

http://www.nytimes.com/2009/11/13/opinion/13krugman.html?_r=1&hp

[Kurt_and_Hunter]

6. Yes, the timing is by design. Bad design.

It's hardly a defense of a program to say, "If it isn't doing what it needs to that is only because it was designed not to."

Many called for more front-loading. The current situation was not unanticipatable.

[Kdillard]

10. Thanks. It seems like this point needs to be made over and over again. A huge

Chunk of the stimulus money has not been spent yet . It is early days and we will have to see more economic data in the next two years to judge whether the size was enough or how effect the design of the plan was before the doom should begin or calls for more should be started.

[Christa]

11. K & R nt

[Clio the Leo]

12. My state has spent more Recovery money than just about any other state ...

.... percentage wise, not dollar amount ..... and we also have one of the lowest unemployment rates in the country. I cant help but wonder if there's a connection.

[AllentownJake]

16. Depends on your industry

I believe Tennessee had less exposure to some of the foreclosure nonsense that has gone on than states like GA, CA, FL, etc.

[Clio the Leo]

17. Well........

.... and the fact that our good (ha!) Senator has helped Volkswagon take advantage of the southeast being a "we dont 'low none of them commie unions!" zone to build a plant here isn't hurting either.

Either way, for our Blue Dog governor to be so opposed to the stimulus initially, he has done a mighty fine job of spending it (and I'm glad.) ...... Even "government health care is socialismsss!!!" Zach Wamp made a big media day of the way "he" brought money from DC to repair one of the TVA dams here.

They're Charlie Crist in reverse.

[AllentownJake]

22. You also have a real public option

Something I believe unique in the country.

[Clio the Leo]

23. well, depends on what you're calling "real"

.... not just anyone can get it. I tried when I was in college and only working part time and, at that time, they were only enrolling children and mothers below a certain income level (I may be wrong on that last part.) But I know *I* did not qualify. I ended up buying a private emergency care plan until I started working full time.

[Garam_Masala]

20. Then you are closing in on N. Dakota !!

That is the ONLY state which gained jobs in the last reporting period.

[impik]

24. Real journalism is dead

If article like this one is coming out only now - and only on the web version - just shows you where the MSM is.

[CitizenLeft]

26. just a personal observation about small businesses...

...and I'm only talking about the 2 small businesses I've worked for. Obviously, they don't represent ALL small businesses.

1. I began working for a small business in the fall of 2005. There was a change of ownership 3 months after I'd started working there. At that time, the company was recording 14 million dollar profits. Within 2 years, they were in the red due to horrifically stupid spending decisions (we know, it was disclosed in a company-wide meeting) and inflated salaries on the high end of management (I know what their salaries were becuase somebody actually left the salary disclosures on the copy machine! I was kinda shocked). So they started cutting back - laid off the entire warehouse staff, who were making not much more than minimum wage. Then they started cutting into operational staff. That means me. I was about #8 to be laid off, so I lasted awhile. During this time, I'm assuming the high salaries weren't touched, but I can't know that. This company is now barely surviving, and it's questionable how much longer they can last.

2. After being laid off from the company above, I was employed by small family-run business #2. During the summer, sales plummeted, in spite of their attempts to diversify (which the above company did not). After 5 months when things had about bottomed out, instead of cutting back on the excellent bagels and fancy coffee served every morning - or instead of laying off one of the 3 underworked salespeople who were the owner's personal pets - it was they who'd failed to keep sales status quo, after all - they laid me off, one of the lower salaries in the company. I was never able to take 1 1/2 hour long lunches every day, nor could I afford it. Last hired, first fired.

I have since landed a low-paying job with a large organization (though they offer the best benefits I've ever seen). In time - unless we actually fall into a deep depression worse than the 1930's - I'll be in the black again and I'll get raises and I'll feel "safe" again, naive though that may be (this job is as stable as I could've hoped for during these hard times). But - God forbid it should ever happen to me again - should I have to go job-hunting again, I will never ever consider a small company. Just like with large corporations - I've worked for them too - small business owners show no more loyalty to employees than large companies. I'd have gladly taken a pay cut - or forego the fucking bagels - to keep my job. No such thing happened.

So... just my two cents, and just my personal experiences.

[Kurt_and_Hunter]

27. If the stimulus has "barely started" then it is the stupidest plan since invading Iraq

How the hell can anyone crow about this?

That's not an excuse, it is a confession!

If the stimulus has barely started then it is a fucking disaster BY DESIGN.

As everyone with any sense pointed out when the thing passed.

You don't back-load emergency measures.

[Garam_Masala]

28. If you can understand that and I can uderstand that

why such obvious thinking does not permeate in the brains of the poo-bahs in
federal bureaucracy? May be they are waiting for the November 2010
elections to be over before they stimulate! Unreal!!