Imaginary Growth

It is now five years since the passage of the Stimulus in 2009.  Remember the Stimulus?  That was the spending package that president Obama and the Democrats pushed through Congress to “rescue” the economy and get America growing again.  The Stimulus increased federal spending by over 30%.  Under the usual Keynesian economic analysis, the Stimulus should have shot the economy upwards.  After all, there had never before been a spending package of this sort passed in America.  For the first time, the Democrats were able to apply their economic theories without meaningful opposition.  Obama got everything he wanted and more. 

So did it work?  The short answer is no.  The long answer is “not even close.”  All that Obama and the Democrats managed to do was to borrow a trillion dollars from the Chinese to spend on (1) excess state employees; (2) state and local projects that would have been built with or without federal funds; and (giving cash to favored Democrat groups and friends of Obama.  The single biggest part of the Stimulus went to states and localities to help pay the salaries of government employees.  Then, once the cash ran out in 2010, those employees were let go.  There was no meaningful diminution of state or local services; all that happened was excess employees were fired.  There was no growth in jobs or economic activity.  Then there were the so-called “shovel ready” jobs.  Because state and local construction projects require a lengthy process to complete the design and approve the project, the only things that were shovel ready were projects that were slated for construction in 2009 or 2010 with or without the federal funds.  For example, in my own town, the Stimulus funds paid for repaving six streets which were scheduled for such work long before the law was passed.  Hundreds of billions were spent, but no new economic activity took place.  Instead of state funds, however, money borrowed from China was used instead.  Then there were the schemes like “green energy” that brought us the feds shoveling cash to Obama’s friends and supporters.  Remember Solyndra where an Obama supported got hundreds of millions of federal dollars before declaring bankruptcy?  It was just the tip of the iceberg.

So five years later, we can look back to see if the growth of the economy was really boosted by the Stimulus.  The answer is clearly no.  Hopefully, next time there is an economic crisis, Congress will remember the waste that was the Stimulus and act more wisely.