Debate Continues on Impact of Federal Stimulus Plan

Debate is likely to continue for decades over whether the nearly $800 billion federal stimulus package adopted one year ago saved the country from economic collapse. The Obama administration and its supporters have been shouting the success of the stimulus for the past week, as they celebrate its anniversary with a marketing campaign aimed at building support for a second phase.

It is indisputable that the economy is growing again — GDP is pushing up at a blistering quarterly rate of 5.7 percent, a result that has to be credited in some part to stimulus spending. What's in play is whether this is a durable expansion or a temporary surge attributable to inventory replacement and other unsustainable factors.

Investors clearly have not made up their minds. They aren't putting their money toward investments that would create jobs and boost growth. Considerable uncertainty remains about the economic direction of the country, as well as the future plans of the taxman. The stimulus package is doing nothing to restore confidence.

We also know for sure that the stimulus hasn't fulfilled its stated purposes. When passed, the nation was assured the massive spending would hold unemployment under 8 percent and "save or create" 3.5 million jobs. The jobless rate eventually topped 10 percent, and has only recently dropped slightly below that mark. The White House's claim of more than 2 million new jobs attributable to the stimulus package has been discredited by investigative reporting from the Associated Press and newspapers across the country.

Most of the jobs saved were in the public sector.

That's because much of the first phase spending — $147 billion — went to states to fill their budget holes or shore up safety net programs such as unemployment insurance and Medicaid. In many cases, Michigan being the prime example, the money allowed states to delay necessary spending reforms for another year.

The stimulus package also didn't deliver on its promise to build a healthier economic infrastructure for the nation. Just $31 billion was spent on infrastructure projects, with most of that going to road and bridge projects and not to the sort of visionary investments in things such as broadband networks and high-tech manufacturing that might support future job growth.

What we may never know is whether a different approach would have worked better. Would deeper and broader tax relief have triggered a recovery-inducing consumer spending spree, the way the Cash for Clunkers program revived the auto industry last fall?

That's a question that ought to be thoroughly explored before spending an additional $300 billion of the package.

And if we are entering a sustainable recovery, it may be that not spending the next $300 billion would have the most positive impact on the economy, considering the jitters at home and abroad over the America's commitment to destructive deficits for the long-term.

Instead of cheerleading for a program that has delivered such uncertain results, the administration should give itself the benefit of an honest assessment of what the stimulus really accomplished, and whether a new direction might produce a better return.

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