President Obama has now been in office for over six months and despite his signature $787 billion stimulus, unemployment remains above 9 percent.
“The federal government is the only entity left with the resources to jolt our economy back into life,” Obama said back in February. Touted at the time by Obama an absolute and imperative necessity for America’s ailing economy, the stimulus was heralded the optimum plan to ameliorate rising unemployment, aid small and large business alike, assist struggling local and state governments, and pull America out of the recession.
Proponents of Keynsian economics argue that injecting massive government expenditure into the market leads to extraordinary benefits due to its inevitable “multiplier effect.” Hence came Obama’s urging of Congress to pass the largest government spending bill in world history “without delay” before any review and scrutiny could be possible, only to then sit untouched a few extra days during Obama’s visit to Denver.
The Brookings Institution held a discussion-panel on August 13th assessing the fruition of the stimulus’ promises and future impact on America.
“The good news is the recession is beginning to end, but government’s had nothing to do with it,” Barry Bosworth, a Senior Fellow in the Economics Studies Program at Brookings Institution, began. “Disposable income for households have risen, but that’s been offset by government spending and payments— and people still aren’t spending. The problem is government has not acted fast enough because of the political process, and government hasn’t had anything to do with business investment growth.”
Russ Whitehurst, Senior Fellow and Director of the Brown Center on Education Policy at Brookings, cited the troubles that are attached to federal funding. “What’s the exit plan? How do you turn the spigot off, and do people plan to turn the spigot off?” he asked.
Also part of the panel were Amy Liu, Deputy Director and co-founder of the Metropolitan Policy Program, and Christopher Zimmerman, a member of the Arlington County Board.
Amy Liu analyzed the cloudy and uncertain status of the American economy. In her assessment of the stimulus package’s effect, she notes an uneven recovery— unemployment rates range from 5% in Provo, Utah, to 17% in Modesto, California, and low housing prices down as much as 30% in 100 of the largest metro areas.
“A broad-based, fiscal stimulus measures may not be enough. We may need targeted intervention,” she contended. Liu praised and endorsed the alleged financial boon and redeeming quality of the green sector.
“Green jobs will be the game-changers and lead to long-term prosperity,” she said. “And I’d say that at the local and regional level, this part of the stimulus package is what’s generating the most game-changing initiatives and efforts to really undergird the recovery. These are the ones that will have the big multiplier effect and have long-term economic value.”
The stimulus package predicated that America would experience 8.5% unemployment without the package and 7.5% with it. It passed and today unemployment is 9.5%, and the White House is predicting double-digit unemployment rate will occur within months.
“I am unequivocally grateful for the stimulus, but it wasn’t enough,” Zimmerman said. “The recession may be over but it’s only going to get worse for state and local governments.”
Whereas Amy Liu cited the need to “urge spending” to meet spending targets, Zimmerman stated the “desperate” need for additional federal-spending.
“The Department of Transportation has hit 50% of their spending target, but some have refrained,” Liu said.
“Implicit in this conversation, at least as I hear it, is that while the private sector has to shrink amid circumstances in which revenue is decreased, the public sector will always be made whole,” Whitehurst stated. Whereas earlier in the discussion Whitehurst said, “If you’re looking for examples of projects and activities that began or were continued as a result of stimulus expenditure, you’ll have a great deal of trouble identifying.”
“The administration has been explicit about not wasting a crisis, and they certainly had reform agenda tied into the Stimulus Bill,” Whitehurst admitted. Nonetheless he had no qualms about having to go back to Lyndon Johnson “to find a time when there was as much power centralized in education.”
Mr. Bosworth expressed strong disapproval with the administration’s crisis mentality as “the worst possible thing because you end up using it for other agendas, as is happening here. And it will be even more severe in a second stimulus.” But even he endorsed faster and more government action.
“We do exactly the wrong thing when we’re raising our taxes and cutting our spending in the middle of a recession,” Zimmerman acknowledged. Yet Mr. Zimmerman emphasized the “desperate” need for a second stimulus, and getting something for nothing— as long as taxes aren’t raised during his tenure as an Arlington official.