Issue of the week: Has the stimulus failed?

Six months after the stimulus package was passed, there are 2.6 million fewer jobs, the unemployment rate continues to rise, and policymakers remain doubtful about the economy's revival.

Not even the government’s own top economic policymakers are claiming that the Obama administration’s economic stimulus program has been effective, said Scott Lanman and Edwin Chen in When the $787 billion package of tax cuts and spending programs was passed last February, Obama said it would “create or preserve” 4.6 million jobs and set the stage for an economic recovery. Nearly six months later, there are 2.6 million fewer jobs than when the measure passed, and the best that Lawrence Summers, head of Obama’s National Economic Council, can say is that the economy is “no longer in free-fall.” And though Summers argues that the stimulus will generate a “gathering force” in the coming months, he concedes that economic growth next year “is very much in doubt and difficult to predict.” Federal Reserve Chairman Ben Bernanke was no more sanguine, said Louis Uchitelle and Gerry Shih in The New York Times, telling Congress this week that “the job loss rate remains high and the unemployment rate continues its steep rise.”

Their comments amount to an admission of failure, said Kevin Hassett in But failure was inevitable, given how the stimulus was structured. It was divided into $499 billion in “Keynesian-style government spending measures” and $288 billion in tax relief. Most of the spending is still only in the planning stages—by one measure, “a measly $7 billion” in stimulus spending has actually made its way into circulation. “It is impossible that such a small amount had any effect on the economy.” As for tax relief, the government’s own figures strongly suggest that the money wasn’t spent by taxpayers, but went straight into savings. In other words, neither part of the stimulus bill has revived economic growth. And yet some congressional Democrats “have the temerity to call for more of the same.”

That’s because “what’s being called stimulus is just a smoke screen for a permanent expansion of government,” said Edward Lazear in The Wall Street Journal. Congress and the Obama administration have crafted spending programs that will take years to roll out and “will be difficult to stop once they are up and running.” In fact, they’re likely to become permanent. Now, it’s possible that the American people really want to adopt “the European model of big government.” But that decision should be a matter of public debate. Instead, we’re getting socialism by stealth.

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“It’s much too soon to be condemning the stimulus package,” said Daniel Gross in If the administration has failed, it’s in managing the public’s expectations. The economy was in dire shape when the stimulus bill was under consideration, yet “the Obama team spoke of the patient as if it were merely wounded, when it had flat-lined.” Given the depth of the economy’s fall, the recovery was bound to be slow, fitful, and weak. A return to good times is still a long way off, but it would be even longer without the stimulus.

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