By William W. Chip
Nearly three years after Congress enacted a $787 billion stimulus package, the U.S. unemployment rate at the end of January stood at 8.3 percent—exactly where it was the month the stimulus passed and only half a percent below where the Obama administration predicted it would be if there had been no stimulus. This “mother of all stimulus bills” failed to deliver as promised. Ominously, hardly anyone agrees on why it failed.
Some Democrats have argued that $787 billion was not enough. Last fall the president called for a second stimulus package of $450 billion. Two days after the president’s speech, Christina Romer, former head of Obama’s Council of Economic Advisers, argued that a second stimulus should be “substantially larger.” The president would have proposed more in the first place, and would probably have gotten his way, had Republicans not taken control of the House of Representatives in 2010.
Many Republicans have accepted that a fiscal stimulus was needed, but they argue that the money was spent on the wrong things and would have given a bigger boost to the economy had a larger portion taken the form of tax cuts. There is no shortage of anecdotal evidence about misdirected spending, such as a February 2009 report from the American University Investigative Reporting Workshop showing that 80 percent of renewable-energy stimulus funds had gone to foreign turbine manufacturers, creating about 6,000 manufacturing jobs overseas but only a few hundred in the United States. In a September 8, 2011 editorial, the Wall Street Journal, citing other evidence that stimulus spending was “poorly targeted,” argued that “the economy would have benefited far more if the government had instead improved the incentives for people and businesses to invest, produce and grow,” presumably through lower taxes and relaxed regulation.
Read more: http://www.theamericanconservative.com/blog/why-stimulus-fails/
Nearly three years after Congress enacted a $787 billion stimulus package, the U.S. unemployment rate at the end of January stood at 8.3 percent—exactly where it was the month the stimulus passed and only half a percent below where the Obama administration predicted it would be if there had been no stimulus. This “mother of all stimulus bills” failed to deliver as promised. Ominously, hardly anyone agrees on why it failed.
Some Democrats have argued that $787 billion was not enough. Last fall the president called for a second stimulus package of $450 billion. Two days after the president’s speech, Christina Romer, former head of Obama’s Council of Economic Advisers, argued that a second stimulus should be “substantially larger.” The president would have proposed more in the first place, and would probably have gotten his way, had Republicans not taken control of the House of Representatives in 2010.
Many Republicans have accepted that a fiscal stimulus was needed, but they argue that the money was spent on the wrong things and would have given a bigger boost to the economy had a larger portion taken the form of tax cuts. There is no shortage of anecdotal evidence about misdirected spending, such as a February 2009 report from the American University Investigative Reporting Workshop showing that 80 percent of renewable-energy stimulus funds had gone to foreign turbine manufacturers, creating about 6,000 manufacturing jobs overseas but only a few hundred in the United States. In a September 8, 2011 editorial, the Wall Street Journal, citing other evidence that stimulus spending was “poorly targeted,” argued that “the economy would have benefited far more if the government had instead improved the incentives for people and businesses to invest, produce and grow,” presumably through lower taxes and relaxed regulation.
Read more: http://www.theamericanconservative.com/blog/why-stimulus-fails/
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