“True the economy still stinks, and true the stimulus didn’t do what we predicted it would, but that’s because Bush left the economy in worse shape than we thought. If it wasn’t for our quick action, America would have fallen into a great Depression.”
If you believe the President and is progressive followers, the $800+ trillion dollar stimulus plan saved America from falling into a great depression. Many are predicting that claim will be a big part of Obama’s reelection campaign.
Like many other claims coming from the Obama the claim that the stimulus saved us from a Great Depression is pure hyperbole.
IBD reviewed records of economic forecasts made just before Obama signed the stimulus bill into law, as well as economic data and monthly stimulus spending data from around that time, and reviews of the stimulus bill itself.
The conclusion is that in claiming to have staved off a Depression, the White House and its supporters seem to be engaging in a bit of historical revisionism.
Economists weren’t predicting a Depression.
White House economists forecast in January 2009 that, even without a stimulus, unemployment would top out at just 8.8% — well below the 10.8% peak during the 1981-82 recession, and nowhere near Depression-era unemployment levels.
The same month, the Congressional Budget Office predicted that, absent any stimulus, the recession would end in “the second half of 2009.” The recession officially ended in June 2009, suggesting that the stimulus did not have anything to do with it.
As a matter of fact, based on the numbers the stimulus had little or any role in ending the recession.
The chart below shows that the recession had pretty much bottomed out by the time the stimulus bill was signed.
According to economists, the recession officially ended in June 2009. Only 15% of the stimulus dollars had been spent by that date, so its safe to say very little of those funds had anything to do with getting us out of the recession.
When the recession officially ended in June 2009, just 15% of the stimulus money had gone out the door. And that figure’s likely inflated, since almost a third of the money was in the form of grants to states, which some studies suggest they didn’t spend, but used to pay down debt.
Other programs Obama often touts — Cash for Clunkers, mortgage help, homebuyer tax credits, the auto rescue plans — either came as the recession had ended or was ending or were widely deemed to be busts.
….Also often overlooked is that a tremendous amount of stimulus already was in the economy when Obama took office, including President Bush’s $150 billion stimulus, two unemployment benefit extensions and $250 billion spent on “automatic stabilizers.”
More importantly, the Bush administration pushed through the controversial $700 billion TARP program (which Obama sustained), while the Fed pursued an aggressive anti-recession campaign by, among other things, effectively lowering its target interest rate to zero.
Princeton economist Alan Blinder and Moody’s Analytics chief economist Mark Zandi studied the relative contribution of Obama’s $830 billion stimulus compared with TARP and the Fed’s “financial-market policies.”
While the economists credit Obama’s stimulus for helping end the recession when it did and keeping unemployment lower than it would have been, they concluded that TARP and the Fed’s actions were “substantially more effective” at saving the economy from ruin.
Is IBD suggesting that it was Bush rather than Obama who ended the recession? I would not go that far. But I would suggest that based on this research, the stimulus plan was nothing but a big waste of money.