Wednesday marked the seventh anniversary of the passage of the American Recovery and Reinvestment Act – the “stimulus bill” – and Vice President Joe Biden marked the anniversary with a visit to New Orleans to tout the legislation’s success.
The trip was also a reminder of what could face the country if the nation faces another recession and the next occupant in the Oval Office is ideologically predisposed to make a decision that would make that recession worse.
It bears remembering that when the Recovery Act was put to a final vote in 2009, it passed without a single Republican vote in the House and only three in the Senate. The bill was widely trashed by Republicans as wasteful spending that would fail to create jobs but succeed in driving up the federal deficit – even as they subsequently touted the jobs Recovery Act spending would create in their states.
Some of those jobs were created at the facility Biden visited, the Mississippi River Intermodal Terminal and Yard, which is being upgraded with the aid of $16.7 million in Recovery Act funds. The upgrade will allow more goods to be shipped by rail through the yard more quickly. It will also create 100 new permanent jobs on top of the design and construction jobs created during the terminal expansion. “This is a money-maker, this is a job maker, this is a community maker,” Biden said.
In hindsight, only right-wing ideologues deny the positive impact of the Recovery Act in pulling the country out of the recession. Economist Mark Zandi, who among other endeavors was an advisor to Sen. John McCain’s 2008 presidential campaign, told the New York Times at the end of the first year of the Recovery Act: “The economy has shed some three million jobs over the past year, but it would have lost closer to five million without stimulus.”
A 2015 analysis Zandi did with economist Alan Blinder for the Center for Budget and Policy Priorities found that the Recovery Act and other fiscal measures executed by the Obama administration increased gross national product growth on average more than 3 percent between 2010 and 2012, leading to the creation of about 7.6 million jobs.
That kicked off a series of month-to-month gains in employment that is historic in its length. At the time, we criticized President Obama and the Democratic Congress for not passing an even more expansive bill, which we believed would have given even more thrust to the economic expansion. But at the same time, we shudder to think what would have happened if the Republicans in Congress had won the argument.
Instead of spending on projects that put millions of unemployed people to work right away on infrastructure projects and other public needs, the Republicans would have opted for deep tax cuts – and even deeper spending cuts to match. But with millions of people without jobs and without money to spend, there would be nothing to compel business to invest their newly freed cash back into the economy in the form of business expansion and job creation – and every incentive to use that cash instead on stock buybacks to prop up market valuations, and CEO bonuses based on those artificially inflated valuations.
As angry as people are today over today’s slow-growing economy, anemic wage growth and extreme wealth inequality, imagine the apocalyptic economic and political landscape that we would see without the Recovery Act to ignite a virtuous cycle of government investment that put people to work, sparking private-sector revival and job growth.
That is not how many of today’s leading Republican presidential candidates see it. In 2014 Sen. Marco Rubio said that the Recovery Act “clearly failed” and that the legislation’s results were “proof that massive government spending, particularly debt spending, is not the solution to our economic growth problems.” At the same time, Sen. Ted Cruz posted a snide remark about the Recovery Act on Twitter: “Well, five years in, it looks like President Obama’s stimulus did actually create jobs. Unfortunately, they’re all at the IRS and NSA.”
Rubio, using standard-issue conservative framing, said that instead of actions like the Recovery Act, policymakers should be cutting taxes, cutting government regulations and bringing our “massive” debt under control. But it was just this type of austerity policy – cutting government spending during an economic downtown – that caused much of Europe to lag behind the United States in recovering from the 2008 financial crash, and in fact hobbled the U.S. recovery when Republicans took control of the House of Representatives after the 2010 election and shut down any possibility of building on the Recovery Act’s emerging success.
But it gets worse. As Jared Bernstein writes Wednesday at The Washington Post, there are currently government programs that act as “automatic stabilizers” that “mechanically ramp up during recessions as more people lose income and thus meet the programs’ eligibility criteria” – such as the Supplemental Nutrition Assistance (“food stamp”) Program and unemployment insurance programs. We should be looking at ways to strengthen the ability of these programs so they can more effectively buffer the impact of a recession on struggling families, Bernstein argues. Instead, Republican lawmakers are advocating changes that would do the opposite, such as converting the SNAP program to a fixed block grant to states that would not necessarily adjust when demand for the program increases.
None of the presidential candidates have been confronted with the question of what they would do if they faced a recession, but it is already somewhat clear. Both Hillary Clinton and Bernie Sanders have proposed plans that would already have the government creating jobs in infrastructure, green energy and other vital areas. Their differences are largely a matter of degree. The Republican candidates, judging by their rhetoric and previous actions, would double down on cutting spending, including on the very things that individuals and businesses would need most during an economic downturn. The one exception would be tax cuts – or, more correctly, tax expenditures – on corporations and the wealthy. The rich would certainly weather a recession in a Republican administration. The rest of us? We’d be in an economic storm without a lifeboat.
Given that set of facts, it should be pretty obvious which ideology and which set of policies most Americans would want to see embodied in the next occupant of the Oval Office.
This post has been updated with an additional reference to Recovery Act results.