When President Obama signed his $800 billion stimulus bill five years ago, the U.S. economy was losing 700,000 jobs a month and contracting at a Depression-level rate. “I don’t want to pretend that today marks the end of our economic problems,” he said then. “But today does mark the beginning of the end.” The stimulus quickly became a national joke, mocked by the right as a massive boondoggle and by the left as a pathetic pittance. A year after it passed, the percentage of Americans who believed it had created jobs was lower than the percentage of Americans who believed Elvis was alive.
But the Recovery Act did launch a recovery. The economy started growing again in the summer of 2009. It started adding jobs again in the spring of 2010. And on Feb. 17, the White House released a report documenting how the stimulus spelled the difference between contraction and growth. It found that the Recovery Act increased GDP by 2 to 2.5 percentage points from late 2009 through mid-2011, averting a double-dip recession. Along with a series of follow-up stimulus measures, the Recovery Act produced a 2% to 3% increase in GDP in every quarter from late 2009 through 2012.
The White House is not an objective source, but its estimates are in line with those of the nonpartisan Congressional Budget Office (CBO) and many private-sector analysts. Before Obama took office, it would have been a truism to assert that stimulus packages stimulate the economy; every 2008 presidential candidate proposed one, and Mitt Romney’s was the largest. Today stimulus has become a partisan political football, but that truism is still true.
And the stimulus did more than stimulate. It improved nearly 42,000 miles of roads and provided tax cuts to 160 million workers. Its unprecedented investments in clean energy have launched a revolution in electric vehicles, LED lighting and solar power. It’s the reason the use of electronic medical records has more than doubled in doctors’ offices and almost quintupled in hospitals. It upgraded more than 110,000 miles of broadband infrastructure, and it launched Race to the Top, the most ambitious national education reform in decades.
But the Recovery Act became so unpopular so quickly that future politicians might shy away from taking similar action. Europe quickly embraced austerity, which is one reason its unemployment rate is almost twice as high as the U.S.’s. America’s political pendulum also swung back, producing the sequester and other antistimulus moves that the CBO says have inhibited growth.
Still, the report is a reminder that the Recovery Act succeeded in creating jobs and saving Americans from a much worse fate. We’re still healing from the worst crisis in 80 years, but we’re well past the beginning of the end.
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