Obama's Greatest Achievement: The Stimulus?

Ronnie R:

We disagree on whether he is a good president, I believe that he is not. So I ask you Jimmy, what has been his greatest accomplishment over the last 7 years of his presidency? Jimmy D: In my opinion, the most important achievement and greatest accomplishment of President Obama (and the Congress for that matter) was his first major act: The American Recovery and Reinvestment Act. Now we can argue about whether or not it worked…but it’s been done and it’s still being done. There have been numerous studies to the effect of the ARRA. The Washington Post has a nice write-up where they state, “Of the nine studies I’ve found, six find that the stimulus had a significant, positive effect on employment and growth, and three find that the effect was either quite small or impossible to detect.” (1) That’s not to say ‘6-vs-3, I win.’ That’s to say it’s very easy to go back and forth and argue about Keynesian macroeconomic theory and it’s effect on the United States economy. Economists (who never agree on anything) were of course split. There were 200 economists who took out a full-page advertisement who were against the stimulus package. There were another 200 who wrote Congress in favor of it. Some even believe it didn’t go far enough. So we can go around a circular argument for days with models and studies but we’d be wasting our time and our reader’s time. We’ll never have a definitive answer because all of the points can be argued to no end. My standpoint is this: 30 days into office and this was his first chance to act upon a crisis. Most importantly, this was a crisis that he inherited. As a progressive he just couldn’t sit idly by and allow the economy to descend into a depression. He was voted in on ‘Change’ and he had to change something. Not acting during the Great Recession (as it’s been come to be called) could have been devastating. Acting with the ARRA may not have the saving grace the Obama Administration claimed it would be but it did accomplish enough to keep the ship afloat during a terrible economic crisis. The biggest aspect of all this was it was his first at-bat. For the people who voted for him it was a celebrated achievement. But hey, you can’t please everyone. (1) http://www.washingtonpost.com/blogs/ezra-klein/post/did-the-stimulus-work-a-review-of-the-nine-best-studies-on-the-subject/2011/08/16/gIQAThbibJ_blog.html Ronnie R: What this discussion ultimately comes down to is this, what drives the economy, the government, or the private sector? No matter which numbers you use, this is an incredibly large amount of money. However, it is the entire philosophy behind the stimulus that is misguided and flawed. Remember, the government does not have ANYTHING other than what it takes from the private sector. In other words, the government has no money of its own, only money raised via taxation levied against we the people. Whether that be individuals or businesses it matters not. This program is the epitome of government inefficiency. Using CBO numbers, the average cost per job created by the stimulus was $46,500. (1) That's absurd, the average cost per hire of all companies in the U.S. in 2012 was $3,479. (2) If I run the math using those numbers, the private sector is more efficient at 13 to 1 when compared to the government. Lets look at the total dollars spent (which itself is impossible thanks to government math) and for sake of time use the $279 billion dollars in discretionary spending. Now let's divide that money spent by the $3,479 it costs the private sector to hire someone. You get 80,195,458 jobs created. It is a staggering number to look at. If you always do what you have always done, you will always get what you've always got. Government trying to spend it's way out of the country's problems never works and it will never work. We should rather examine other country's that have success with managing recessions. Sweden for example implemented a pure supply side economic tax strategy and it paid off wonderfully. (3) It will never happen here though because it requires the government to take in less money each year. (1) https://www.whitehouse.gov/sites/default/files/docs/cea_arra_report.pdf (2)http://insights.dice.com/2012/01/18/cost-per-hire/ (3)http://www.aei.org/publication/swedens-amazing-supply-side-tax-cut-experiment/ Jimmy D: When you look at the entirety of the bill, the ARRA was expected to provide an impulse of about $831 Billion with 90% spent by 2012 or closer to $750 Billion total between 2009-2012. There were 3 parts to the stimulus (1). There were $212 Billion in tax cuts (which you should love), $296 Billion in Medicaid and unemployment benefits (which were necessary), and then the discretionary spending (which was expensive). For once though, it's not just about the spending. I'm not saying the stimulus was perfect. It wasn't. But you can't say "Hey the private sector would've done better" when it was pouring jobs down the drain. We wouldn't have needed a stimulus if the private sector was adding millions of jobs a year. The stimulus did what it was meant to do…it kept us from falling deeper in the hole. It was his first Act as President. He acted in crisis. He did what was right by many accounts. Could the ARRA have done more? Yes. Could the President have done more? No. He worked with Congress (well the side that would work with him), got what he could, and signed the Act. There were even a few from the other side of the aisle to vote for it. I'll never say it was perfect. But it served a purpose. And in my opinion it was the most important Act of his Presidency. Ronnie R: Could the president have done more? Perhaps not. Could he have done something different though? Absolutely. Keynes' philosophy makes sense when viewed through a short term perspective. Yes, it gave the economy a shot in the arm and helped liquefy medicaid for a couple of months. However, it added billions to the deficit and by the end of Obama's second term he will have doubled the national debt accumulated by every president that came before him. I don't need to explain how that is a bad thing. As I mentioned before, adopting a supply side economic view of creating growth will help solve our country's problems. Government is not the answer to our problems. It is there to facilitate a fair environment for growth driven by the people. Concession: The stimulus helped solved the problem as a short term band aid. It provided temporary relief, specifically to an industry that needed it right then and there. Non Concession: Government spending it's way to economic growth is never going to be a viable solution. Until politicians learn to get out of the way, our spending problem and therefore our debt, will continue to spiral out of control. Jimmy D: You can argue for supply-side economics just as much as I can argue for Keynes. I also find it interesting that Sweden, a country deemed fairly socialist, can present a model for something you could adopt. But I digress. The ARRA was expected to be just what you described it; a short term shot in the arm. That's what it was supposed to be and that's what it did. Concession: I'll concede the stimulus was not effective as what was being preached. It's that simple. It wasn't completely false pretenses, but we paid $50 for a $25 steak (or worse). I can probably chalk that up to an ineffective Congress. I'll also concede it did damage to the national debt that should have been reversed in later budgets. If you want to pour $800B into tax breaks and discretionary spending, that's fine. But do the opposite once we come out of the crisis. That wasn't done but should have been done. Non Concession: The stimulus did help. It kept the ship afloat. It served a purpose. I can't overstate that. Keynesian economics worked. It helped our country get through a crisis. The government can step in and help when the time calls for it. In this case, there was a government solution that did help. government isn't always bad….it just needed to better here. Middle Ground: The stimulus was a short-term fix that helped to solve a major crisis. We both agree that this solution was completely inefficient in terms of how the money was spent and allocated. It could have and should have been much more effective. Keynesian economics can serve a purpose in the short term. However, it is not a long term solution.

As Jimmy D pointed out, it can, in a crisis, provide enough aid to prevent a complete collapse. Ronnie R still contends it is often the government that continues to make problems worse and there is a lot of truth to that. In the end, both sides are right to a certain degree. The question then becomes how much are you willing to spend for your fix ? Then, what steps do you take after the jolt in order to make up for the spending?