Obama’s stimulus trap
It was, potentially, the most explosive question asked at President Barack Obama’s news conference. Just nine words: “Do you think you need a second stimulus package?”
Now Obama seems to pride himself on his logical nature, so the logical building blocks of the question were surely appreciated.
Consider: The president’s nearly $800 billion stimulus plan was predicated on a particular economic forecast. According to that forecast, the stimulus package would prevent the U.S. unemployment rate from exceeding eight percent. (Even without the stimulus, Team Obama thought nine percent was the upper joblessness limit.)
The unemployment rate is already 9.4 percent, and Obama himself said that number will exceed 10 percent before long. Ipso facto, the stimulus package — Obama’s signature achievement as president so far — was either too small, improperly structured, or both. To admit the need for a “second stimulus” is to admit the first one failed.
So Obama didn’t. After replying “Well, not yet” to the original question, Obama admitted only that the White House forecast has been way too optimistic:
“I think it’s fair to say that, keep in mind the stimulus package was the first thing we did, and we did it a couple of weeks after inauguration … If you recall, it was only significantly later that we suddenly get a report that the economy had tanked. And so it’s not surprising, then, that we missed the mark in terms of our estimates of where unemployment would go.”
So “not yet” is certainly a correct, if limited answer. No need for a second stimulus package, since the first one hasn’t really even gotten going yet.
Some two-thirds of the $787 billion American Recovery and Reinvestment Act was planned to be spent after 2009, so immediate “stimulus” was never really the primary intent of the package. If it had been, the plan would have been front-loaded (massive payroll tax cuts being one possible mechanism) to boost the economy at the nadir of the recession.
As it is, the economy will likely be growing (hopefully) when the bulk of the money hits, though unemployment may still be rising or stuck at a high level.
No, the main goal of the ARRA was to make a downpayment on the Obama healthcare, energy and education agenda, leaving it mostly to monetary policy to bolster the economy in 2009.
Not surprisingly, Obama didn’t highlight the uncomfortable reality that this economic bug was really an intended feature. And most Americans surely don’t realize the political and economic subtleties at play, and so to them the “stimulus” plan doesn’t seem to be very stimulative. Of course, it was not intended to be.
Indeed, a Rasmussen poll earlier this month found that by a 45-to-36 percent margin, Americans think the rest of the stimulus plan should be canceled.
(And, of course, quickie stimulus programs programs have a poor track record. Back in 2008, only a third of the $100 billion Bush stimulus was spent by consumers, according to the Economic Policy Institute. Economist Martin Feldstein estimates that only 15 percent was spent.)
Is it any wonder, then, that if a growing number of Americans think the president’s major economic achievement should be dumped, that a growing number also disapprove of his handling of the economy?