Barack Obama

Down the Drain

How the federal government flushed away the $833 billion stimulus


If you want to see where a little bit of your $833 billion stimulus went, head south from St. Louis on Interstate 44 until you reach the Mark Twain National Forest. On March 13, 2009, less than a month after President Barack Obama signed the American Recovery and Reinvestment Act (ARRA) into law, the federal government awarded $462,912.30 to a Spokane, Washington, construction firm called CXT Incorporated to build and install 22 "precast concrete toilets" in the park. 

These bunker-style commodes did not add to the number of bathrooms in the forest; they replaced existing toilets that didn't meet Forest Service condition standards or accessibility requirements. And they were not just isolated outhouses. New Mexico got $2.8 million to spend on new toilets in its national parks. Another $42 million went to upgrading toilets and other sanitation facilities in Alaska.

The stimulus wasn't sold as a plan to build bathrooms. "We'll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels, fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead," President-elect Obama said in a November 2008 address. The stimulus, Obama vowed, would "put people back to work and get our economy moving again," creating between 2 million and 2.5 million jobs. Instead, the economy followed the money right down the drain. 

What went wrong? Plenty. The stimulus was rushed to passage based on economic assumptions that remain hotly contested. Its implementation was marred by politics, logistics, and red tape. And the aid it directed toward the country's least well off may have undermined the very recovery it was designed to hasten. This is what happens when politicians insist that something big must be done, even if they're not sure what that something should be.

The Rush to Stimulus

The march to the stimulus began on the 2008 presidential campaign trail. "Instead of doing nothing for out-of-work Americans," Obama said in April 2008, "we need a second stimulus that extends unemployment insurance and helps communities that have been hit hard by this recession." Obama framed his call for stimulus as a follow-up to the $152 billion tax rebate George W. Bush signed into law in February 2008. That plan cut most Americans a $600 check. 

Candidate Obama called for something more proactive: Washington-directed, socially conscious spending on education, alternative energy, and transit projects would replace the usual Republican prescription of tax breaks only, allowing government to "grow the middle class by investing in millions of new green jobs and rebuilding our crumbling infrastructure." It was more a  grab bag of longstanding liberal wish list items than a focused spending injection tied to a specific economic theory. 

Soon after Obama won the presidential election in November 2008, his advisers spent a day walking him through the ugly economic realities of the recession. One of the presentations came from Christina Romer, soon to be the head of the president's Council of Economic Advisers. As Michael Grabell reports in his book Money Well Spent?: The Truth Behind the Trillion Dollar Stimulus, the Biggest Economic Recovery Plan in History, which this article draws upon substantially, Romer warned the president-elect of a chilling possibility: that America's economy would plateau but struggle through a decade of weak growth, much like Japan. It was a warning that would prove unintentionally prophetic. 

Obama indicated he was willing to be flexible regarding the details of a stimulus plan, but he made one thing clear. "What is not negotiable," he said, "is the need for immediate action." Romer took the lead on designing the plan. 

Her recommendations had goals similar to those of Bush's tax rebates: Boost output by injecting money into the economy to stimulate consumer demand, and therefore jobs and growth. The hope was to create a "multiplier effect," in which each dollar of stimulus creates more than one dollar of economic activity through a virtuous feedback loop. 

But in addition to having the government rather than consumers spend most of the money, Romer's plan differed strongly from Bush's in one key respect: scale. It was several times larger than any stimulus proposed in 2008 by any prominent politician. On the campaign trail, Obama's Democratic rival Hillary Clinton had proposed a $30 billion stimulus. Then-House Speaker Nancy Pelosi (R-Calif.) put together a $150 billion proposal. Some economists pegged the necessary amount closer to $300 billion, an estimate of how much it would take to get the economy back to its full potential—a figure referred to as the "output gap." 

But Romer estimated that the amount needed to fill the gap was well north of $1 trillion. She pushed for a multiyear plan that would include a combination of infrastructure spending, increased funding for transfers such as Medicaid and unemployment benefits, bailout money for budget-hammered state governments, and tax breaks that would trickle out paycheck by paycheck over several years. 

Political considerations eventually knocked the price tag down to about $787 billion (a figure later revised upward to $833 billion), but it was still the largest and most ambitious recovery plan in the history of the world, putting the country's already extended finances much more deeply in the red. Yet not only did the president's economists not know if it would work; they might never be able to judge whether it had. 

That didn't stop them from predicting success. In January 2009, Romer and Jared Bernstein, who would go on to be Vice President Joseph Biden's top economic adviser, projected that without the stimulus unemployment would hit 9 percent and stay there for nearly a year, but that with a recovery plan unemployment would peak at 8 percent and drop below 7 percent within a year. Of the new jobs created, 90 percent would be in the private sector. Those projections were quickly revealed as fantastically optimistic: The unemployment rate would climb to 10 percent in October 2009 and hover near that level for another year, while millions of people simply stopped looking for work. 

Stimulus supporters still deem ARRA a success in forestalling another depression. But you can't claim success unless you can measure it. And when it comes to massive economic interventions like the stimulus, that's exceedingly difficult to do. 

Multiplier Madness

The key metric in assessing whether the stimulus was a success is the multiplier. Most would consider a multiplier of 2.0, meaning $1 of stimulus generates $2 in economic activity, to be a utilitarian triumph. A multiplier of 0.5, wherein $1 of stimulus leads to only 50 cents in economic activity, would be a bum deal. 

But multipliers are very difficult to gauge. Romer and Bernstein's memo confessed to "substantial uncertainty" about both their choice of multipliers and (in a footnote) the number of jobs created by increased GDP. While researchers can easily determine what happens after governments make big changes to their spending patterns, pinning down cause and effect is trickier than it might seem. How much of the economy's performance can be chalked up to its pre-stimulus trajectory, which turned out to be far worse in late 2008 and 2009 than economists believed at the time?

What you really want to know is what would have happened if there had been no government purchases at all. But macroeconomists cannot conduct the sort of controlled experiments that their counterparts in the world of microeconomics do all the time. 

"Ideally," says Valerie Ramey, a University of California at San Diego economist who has surveyed numerous multiplier studies as well as performed her own research, "the International Monetary Fund would be allowed to go out and conduct a randomized experiment across all the countries, randomly raising government spending in some countries and randomly decreasing it in others. If you did that and watched it for several years, then you could use very simple statistics to try to figure out exactly the answers we're looking for. Of course the IMF is not allowed to do that." 

Fiscal policy researchers have devised a number of workarounds. Some have looked at how state economies perform when they get extra infusions of federal money. But it's hard to extrapolate national information from state numbers. "The statewide multiplier is only loosely linked to the aggregate," says Ramey. "And the aggregate, economy-wide effects are really what we want to know for stimulus."

Stimulus packages typically come in response to recessions, but economists need to isolate the effects of government purchases from the effects of economic slumps. So some look for changes in spending levels that are not direct responses to bad economies—for instance, big military build-ups. 

This approach works, Ramey says, only "if you don't worry about anticipation." After all, people don't merely react to the fact that the government has spent money. They also react to the expectation that the government is going to spend. "Individuals understand that even if the government is deficit spending now, it's going to have to raise taxes later," she says. As a result, people feel poorer and therefore act differently. 

Several years ago, Ramey attempted to measure the effect of anticipation. But how do you figure out what people expect from their government? "You can't believe government documents," she says, "so what I did was look at what business people were forecasting." Ramey read every issue of Business Week starting from 1939, as well as multiple newspapers and other popular sources of information. The result? 

As soon as spending news is made public, Ramey discovered, consumption declines, and so do real wages, something that some prior attempts to measure the multiplier had missed. Essentially, the other measurements had skipped the pregame—and missed the economic reactions that started before the spending took place. 

After including the anticipation variable in her calculations, Ramey found that the multiplier for government purchases was somewhere between 0.6 and 1.1, meaning that at most each dollar of government purchases produced an extra dime of economic activity, while the worst-case scenario meant losing 40 cents on the dollar. (Elsewhere she has estimated the possible high end at 1.2.) Ramey says she suspects the multiplier might be higher if financed "purely with deficits." But she also notes that "trying to estimate that effect precisely is very difficult."

That hasn't prevented Ramey from drawing some conclusions, which she summed up in a 2012 presentation: The government purchases multiplier is "probably" less than one, she said. And while government purchasing increases overall employment, it does so by increasing government employment—not hiring in the private sector. Ramey's work has been convincing enough that in 2011 the Congressional Budget Office—the nonpartisan government scorekeeper that provides policy cost estimates for Congress—reworked its estimates of ARRA's potential effects, reducing the lower end of its estimates.

Others economists have arrived at different multipliers. Surveying the literature, Ramey found that most estimates range between 0.8 and 1.5, and that the data could support conclusions ranging from 0.5 to 2.0. She also found that the variation across studies was nearly as large as the variation within studies. The wide range only underscores how difficult it is to determine a single stimulus multiplier with any degree of confidence.

It also suggests the limits of even a relatively high multiplier. Two dollars of output for one dollar of government purchases may sound like a pretty good deal. But even at double your money—and it is your money—federally funded stimulus still isn't likely to pay for itself.

Why? Because the government has two basic sources of revenue: taxes and borrowing. Paying for a $1 trillion stimulus through tax receipts would require more than $2 trillion in economic activity, because the government does not collect 50 cents on every dollar of GDP. And since virtually all of the $1 trillion is effectively borrowed, the cost of debt service makes the math even less likely to work out.

There was much discussion of multipliers in the run-up to ARRA, and the subject has provided fodder for squabbles among economists ever since. But once Congress passed the stimulus package, there was a new policy question: Exactly what should the administration spend $833 billion on? 

Making It Work or Make Work?

Concrete toilets were only the beginning. A 2010 report from Sen. Tom Coburn (R-Okla.) offered a tour of stimulus spending absurdities. Lowlights included $760,000 for interactive dance software, $1.9 million for international ant research, $550,000 to replace windows at a Forest Service visitor center that was closed, $16 million to help airplane manufacturer Boeing clean up an old environmental mess it had made, $700,000 for behavioral research into how monkeys respond to inequity, and $194,000 to study voter perceptions…of the stimulus package. 

Coburn's report demonstrated that many stimulus projects were easy to ridicule. But there was a deeper problem: ARRA was sold as a way to create millions of jobs right away. Yet it turned out to be surprisingly hard to find projects that were planned and ready to go—and that would actually hire the unemployed. 

In 2011 Garett Jones, an economist at George Mason University's Mercatus Center, and his colleague Daniel Rothschild collected questionnaires from more than 1,300 businesses that had received stimulus funding. The idea was to find out how the businesses actually used the money they got. Did they hire? Who did they hire? What sort of projects did they work on? 

Jones and Rothschild found that the stimulus did spur some hiring. But there's a big difference between hiring and hiring the unemployed. A business can add 10 people to its staff but directly reduce unemployment by only two if eight of the hires already had jobs. As it turns out, nearly half the new employees reported in the survey as paid with stimulus funds were previously employed. 

Low-skilled and unskilled workers were among the hardest hit by the recession. But little effort was made to target those workers for stimulus-funded work. Indeed, many of the projects that made the cut required highly educated employees. In Money Well Spent?, Grabell reports that projects funded by the stimulus included computerized health records, electricity grid upgrades, education databases, climate change studies, environmental cleanup, the purchase of solar panels and lithium ion batteries, anti-smoking campaigns, carbon capture and storage facilities, and prescription drug research. 

"The government targeted its stimulus at sectors of the economy where it was hard to find good workers," Jones tells me. "The reason why is that it was hiring for highly specialized parts of the economy. That's why there was less job creation than you would have expected."

Even some stimulus success stories come out looking worse when judged by their effect on unemployment. In addition to the written survey, Jones and Rothschild conducted detailed interviews with 85 businesses that received stimulus funds. The owner of one construction engineering firm said that if not for ARRA, his firm would have closed. Instead, it was thriving, with 20 new employees. But only six of the new hires were previously unemployed. The rest had been hired away from other firms. 

In such games of employment musical chairs, stimulus might simply increase wages for those who already have jobs. Where unemployment is already low, government spending will just bid up the price of labor. "That's a broader lesson for stimulus nowadays," says Jones. "A lot of the things that the government would like to do involve hiring in sectors of the economy where it's really hard to find good help on short notice. There just aren't that many unemployed environmental engineers around. The best person for the job probably already has one." 

Just as difficult as finding good workers was navigating the law's bureaucratic requirements. A "Buy American" provision included in the stimulus legislation at the behest of unions and steel workers made projects more expensive and harder to get off the ground. Grabell quotes the owner of a Texas pipefitting company who said in a U.S. Chamber of Commerce report that the provision was "a paperwork nightmare…causing huge delays…and stalling otherwise viable projects." 

The stimulus overseers faced a tradeoff: They could try to spend money fast, or they could try to spend it well. But it was difficult to manage both. That was a political problem for the White House, because it had promised to be vigilant in fighting ARRA waste. "The president and I can't stop you from doing some things, but I'll show up in your city and say, 'This is a stupid idea,'?" declared Vice President Biden, the administration's designated stimulus watchdog, at a March 2009 conference. Yet Obama administration officials had also insisted that the public would be able to see the benefits of the stimulus immediately. And if they didn't spend the money, there would be no benefits to see. 

So what did they spend it on? Jones and Rothschild offer a hint. The pair interviewed one contractor with two decades of experience laying tile in government buildings. He made plans to install standard blocks of four-inch white tiles—the same tiles he usually installed, the same tiles found in other parts of the same office complex, and the exact materials called for in the architectural plans. Then he got updated specs. The large white tiles were out. Tiny, colored tiles that needed to be laid in an unusually intricate pattern were in. Did it matter that the smaller tiles would cost the government 50 percent more than the larger white tiles? Not at all. In fact, the higher cost may have been the point. The tile layer told Rothschild's interview team that "the only reason he could see for using the smaller tiles was to move the money out the door on the ARRA schedule."

Was this sort of thing a worthwhile contribution to the health of a nosediving economy? It's a question the administration never truly answered—because it couldn't. 

Numbers Games 

"According to the non-partisan Congressional Budget Office," says, the Obama administration's stimulus website, "the Recovery Act supported as many as 3.5 million jobs across the country." As the stimulus ran its course over roughly three years, the capital's top newspapers kept printing similar, supportive-sounding figures from the budget office. "CBO Says Stimulus May Have Added 3.3 Million Jobs," a Washington Post headline trumpeted in 2010. "CBO: Stimulus Added Up to 3.3 million Jobs," declared a Politico headline in 2011. Senate Democrats touted the estimates as proof of ARRA's success. So did the vice president.

When the stimulus passed, the White House promised more than just results; it promised accountability. "If the verdict on this effort is that we've wasted the money, we built things that were unnecessary, or we've done things that are legal but make no sense, then, folks, don't look for any help from the federal government for a long while," Biden told local government officials at a conference on stimulus spending in March 2009. The administration set up to help collect data, track stimulus spending, and see how many jobs it created.

ARRA also tasked the CBO with issuing quarterly re-ports estimating both the size of the boost the stimulus had given to the economy and the number of jobs it had created or saved. When the CBO put together its estimates, it ran into the same trouble that every economist attempting to measure the impact of government spending eventually faces: the lack of a counterfactual. There was no way around it. In a November 2009 report, the agency flatly declared that "it is impossible to determine how many of the reported jobs would have existed in the absence of the stimulus package."

Impossible, yes, but the CBO was still required by statute to produce a progress report every quarter. So rather than attempt to measure the law's output—the actual number of real-world jobs created or saved—the CBO measured inputs: how much money was spent and on what. Once the CBO knew how much money had been spent, it combined that number with an estimate of the multiplier. Because it relied on a range on multipliers that went relatively high—up to 2.5 for federal purchases—the results were quarterly reiterations of estimates the agency made before the law was even passed. (The White House Council of Economic Advisers also made estimates using a similar technique.)

The CBO estimated that the stimulus created or saved up to 3.6 million jobs. But CBO Director Douglas Elmendorf has also noted that if the real-world results were different —if the law created 5 million jobs, or if it created none at all—the agency wouldn't know. At a March 2010 presentation, Elmendorf characterized the CBO's follow-up reports as "repeating the same exercises we did rather than an independent check." At the same event, Elmendorf was asked, "If the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis?" His response: "That's right. That's right."

The Wrong Incentives

So what did the stimulus actually do? To a great extent, the answer to that question is a matter of faith. Those who believe that the multiplier is high think that the stimulus created a significant amount of economy activity and jobs to go with it. Those who believe the multiplier is low generally conclude the opposite. One thing is clear, however: The economy's performance continues to be far worse than the White House's worst-case projections for what might happen if there had been no stimulus at all. Beyond that, anyone who claims to know with certainty how many jobs the stimulus did or didn't create is just bluffing. 

Yet while it's difficult to determine ARRA's effect on the overall economy, it is possible to examine the economic incentives it created. That's exactly what University of Chicago economist Casey Mulligan has tried to do. 

Mulligan's work starts with a simple insight: Not all of the spending authorized by ARRA was stimulus, at least not as economists usually define it. Some of the program's $833 billion went toward visible public works projects like paving runways and building toilets. But about a third of it went toward what economists call "transfer spending," which includes aid programs for the unemployed and other low-income individuals. Among other things, the stimulus extended an existing program to provide federal unemployment benefits to those who had exhausted state benefit programs. It added a temporary bonus of $25 per week to federal unemployment benefits, suspended taxation on the first $2,400 of unemployment benefits in a given year, allocated $87 billion to increase the federal share of Medicaid benefits, and provided another $25 billion to subsidize health coverage for the newly unemployed. 

Such programs provided an economic cushion to millions of out-of-work people at the height of the recession. They also made it less painful to be unemployed—which is to say, they made it less costly. "When you make something less painful," says Mulligan, "people are going to do less to avoid it." 

What Mulligan found is that the 2009 stimulus created big incentives for people to not work. He estimates that between 2 million and 3 million people "had as much disposable income while unemployed as they would have by accepting a job that paid 80 to 100 percent" of what they were making in their previous job. Before the stimulus passed, that would have been true of fewer than 1 million people. 

It's clear that the incentives changed. But did people respond by behaving differently? Mulligan thinks at least some did. "The effect of incentives on unemployment is something we" —we being economists—"have studied for a long time," he says. "And the effect is clear. When people are paid more for not working, they work less." Even, he says, during a recession.

Individuals receiving unemployment benefits return to work less quickly than those who aren't getting benefits, Mulligan says. He also points to his own research showing that, even since 2007, unmarried people stay out of work much longer than married people. The reason, he argues, has to do with "the fact that there's a bunch of safety net programs that married people don't qualify for. They're getting less help from the government when they lose their jobs. And so they're quicker to get back to work." 

Getting people back to work was, of course, the whole point of the stimulus. In January 2009, just days before his first inaugural, Obama put pressure on federal lawmakers. "I urge Congress to move as quickly as possible on behalf of the American people," he said. "For every day we wait or point fingers or drag our feet, more Americans will lose their jobs. More families will lose their savings. More dreams will be deferred and denied. And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse." 

But four years later, the unemployment rate sits at 7.9 percent. The work force participation rate is lower than at any time since 1981. In the fourth quarter of 2012, the economy grew by just 0.1 percent. Overall growth in 2012 was just 1.5 percent. The CBO now predicts slow growth in the coming year and an economy that will remain below its potential until 2017. Sure, the Mark Twain National Forest has new toilets, and there are repaved runways and roads aplenty. But the looming worry is that we may have hit just the sort of decade-long weak recovery that the Obama administration was seeking to avoid. Perhaps it would have been better to do nothing at all. 

NEXT: Wall Street Opens Down On Weak China Growth

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  1. [teleprompter voice]
    We must… do more… than ever before… to ensure out-of-work Americans stay that way.

    1. Start working at home with Google! It’s by-far the best job Ive had. Last Monday I got a new Alfa Romeo from bringing in $7778. I started this 9 months ago and practically straight away started making more than $83 per hour. I work through this link,

  2. slightly OT – Santorum hospitalized for bowel disorder…..iowa-trip/

    interrupts Presidential campaign trip to Iowa.

    1. Now that is pretty damn funny.

  3. Its a big government so it must do big things to prove the value of its larges even if those large things break the camels back.

  4. “What went wrong?”
    Wrong question. Right question:
    “Did anything go right?”

    1. It would certainly be a much shorter list.

    2. Before the ARRA stimulus we were losing 800,000 private sector jobs a month and the number of job losses was growing. The economy shrunk in the 4th quarter of 2008 at a 9% annual rate. After the stimulus, GDP started growing within six months. Job losses began declining, turning to job gains within a year. We have now recovered over six million private sector jobs. Without the ARRA stimulus, we likely would have lost millions more jobs.

      So yeah, a few things have gone right.

      1. We normally come out of recessions much faster – without such intervention – so I would say ARRA was a net drag.

  5. Create or SAVE 2 to 2.5 million jobs.

    That word is important, so don’t leave it out. You can’t play imaginary-fun-time without it.

    1. global cooling, global warming, climate change, climate chaos

      jobs created or saved

      Remember if you can’t falsify it by constantly moving the goal posts it can never be wrong!

      “it would have been worse had we NOT done something”

      1. “it would have been worse had we NOT done something”

        Exactly. You can NEVER win this argument with a liberal, because they’ll claim counterfactually that the world would have exploded without stimulus, therefore it is a de facto success. Real measurable benefits are only a bonus folks, now bow down and thank the noblemen and magistrates for allowing your continued existence.

  6. From where our benevolent overlords and their self-appointed shills are sitting, the stimulus gives every appearance of having been a success. It wonderfully stimulated the economy of D.C.

  7. It could have been worse, he could have made a million millionaire’s drawn from the welfare rolls. That would have acturaly helped but may have reduced his voting block.

  8. Although this doesn’t establish cause and effect, simple data and graphs show that in the US and around the world *most* of the time the faster government spending grows, the slower the private economy grows. The slower government spending grows, the faster the private economy grows. The method to see this is easy, it doesn’t require fancy statistics and it is easy for the spreadsheet savvy to confirm themselves from government data sites themselves.

    See the new page:…..ingpattern
    for details.

    Usually you would expect that increased taxes due to growth, and increased welfare spending leading to increased consumer spending, would lead the two parts of the economy to grow at the same rate usually. The fact that they don’t means there are major factors at play (and the article addresses the fact that this is likely not due to intentional “stimulus” spending since countries aren’t usually in recessions).

  9. That money wasn’t “flushed away” it was targeted with pinpoint accuracy at papering up the cracks in state and local government budgets.

  10. Well obviously it has to be three times bigger-Krugabe



  11. Then-House Speaker Nancy Pelosi (R-Calif.)

    Um, editing?

    1. Naah.
      Attempt at stress-induced mind-failure.

    2. Now that would be a RINO.

  12. The problem is even worse than the article describes. The stimulus was sold to taxpayers back in 2008 as a one-time emergency measure. However, annual federal spending not only did not return to prior levels after the stimulus ended but instead continued to increase. The one-time increase effectively became a permanent annual increase. It’s the gift that keeps on taking.

    1. How unfortunately true. It’s become a permanant stimulus of $800 billion every year, and the economy is responding, it’s dying a slow death.

  13. I’m not sure why there’s such disdain for upgrading toilets. Sure, it provides comically little value for the money spent, but in the end, the new toilet is some amount (possibly significant, possibly not) better than the old one. Too much of the money in such a way that literally no improvement resulted. Unnecessary tile upgrades and $600 ARRA road signs are nothing more than wealth transfer from future taxpayers to current contractors. When my nephew is old enough to ask me what $800 billion dollars bought us, I’d rather point to a toilet in a nature preserve than someone else’s second home in Aruba.

  14. Peter:

    Good article. I’ve always had a question about the stimulus for which I can’t find a simple answer:

    is the stimulus now baked into the budget baseline? If so, are we spending approximately $800 billion a year on stimulus

  15. What you really want to know is what would have happened if there had been no government spending at all. But macroeconomists cannot conduct the sort of controlled experiments that their counterparts in the world of microeconomics do all the time.

    That’s what makes macroeconomics so fun. No one can prove you wrong.

  16. what Josephine explained I cannot believe that any body able to earn $7050 in a few weeks on the computer. did you see this web site

  17. The multiplier effect comes from two premises:

    People are preferring to save or invest rather than spend.
    The increased government spending is borrowed, not taxed.

    Once you assume those two things, the multiplier follows straightforwardly from the geometric series. Here’s the problem–every dollar borrowed today must be repaid tomorrow, with interest, using money that is taxed. Borrowing to repay the loans just defers the taxation and increases the number of dollars which must eventually be repaid.

    So the multiplier effect, even granting all the premises that proponents of increased spending consider most favorable, can only bring tomorrow’s prosperity forward to today, it cannot create new prosperity.

    Eventually the reckoning comes due, in increased taxation or in inflation.

    1. There is a further problem.
      In any voluntary exchange, both parties have traded a good which they value less for a good which they value more; both parties have found additional value and humanity has found additional wealth.
      Taxes are *NOT* voluntary, so any use of taxed money first has to compensate for that missing increased value.

  18. what Annie said I’m in shock that people can get paid $6982 in a few weeks on the computer. have you read this site

  19. Brayden. you think Vincent`s posting is impressive, on wednesday I bought a great Infiniti after making $4481 this – four weeks past and more than 10-k lass month. this is really the most-comfortable job Ive had. I started this 6 months ago and right away started making a nice minimum $84, per hour. I follow the details on this straightforward website,

  20. You might like this song that my friend Mark Quick wrote called:
    Where Did All Our Money Go? which I posted on my blog.…..riter.html

  21. “That didn’t stop them from predicting success. In January 2009, Romer and Jared Bernstein, who would go on to be Vice President Joseph Biden’s top economic adviser, projected that without the stimulus unemployment would hit 9 percent and stay there for nearly a year, but that with a recovery plan unemployment would peak at 8 percent and drop below 7 percent within a year. . .Stimulus supporters still deem ARRA a success in forestalling another depression.”

    The Romer/Bernstein piece you refer to appeared in January 2009 and made the point that, if no stimulus package whatsoever were passed, the unemployment rate would go only slightly higher, would begin to decline in the near future and would come very close to the unemployment rate with the stimulus package by 2014. (The Romer/Bernstein chart was reproduced in a Paul Krugman column. http://krugman.blogs.nytimes.c…..-stimulus/) The concession that the economy would have recovered without any stimulus package, albeit slightly later and with slightly higher unemployment rate, gives the lie to the preposterous proposition that Obama saved the U.S. from a “second Great Depression.” Ms. Romer’s opinion must be given some weight since she is a professor economics at University of California/Berkeley specializing in business cycles.

  22. The Congressional Budget Office added the $833 billion stimulus amount to the baseline budget. Instead of paying for the stimulus just once, taxpayers get to pay for it each fiscal year. The government just grew and absorbed the stimulus amount, even though she was getting along just fine on $833 billion less before the stimulus was passed.

    1. They don’t dare take it out. That’s the problem with deficit spending.

      The government borrows a dollar that was not getting spent and spends it. That produces a multiplier.

      When the government raises taxes to pay back the dollar, it takes the dollar and its multiplier back out. When the government spends a taxed dollar, it takes the dollar and multiplier out and puts it back in, for a wash. If the government doesn’t borrow and spend an unspent dollar next year, the dollar and its multiplier go away.

      It’s a game of tiger-by-the-tail played from year to year. The government can’t stop borrowing unspent dollars until there’s enough prosperity to pay for the contraction caused by stopping the spending or paying back the borrowing with tax money.

      As long as the government thinks people are sitting on their money, they will be afraid to reduce spending. And so the reckoning gets put off longer and longer, and it will be bigger and bigger when it comes, and it may be that no amount of future prosperity will be enough to cover what we’ve already brought forward.

  23. If you think Randall`s story is amazing,, last week my old neighbour basically also made the small fortune of $5957 just sitting there twelve hour’s a week from their apartment and there best friend’s aunt`s neighbour has been doing this for 5 months and brought in more than $5957 parttime from there computer. apply the guidelines from this site,

  24. Due to continuing resolutions, that $833 billion was “enshrined” in spending since 2009.

    If $85 billion in sequester cuts can result in the loss of 700,000 jobs, then where are all of the jobs that $700 billion x 4 years ($2.8 trillion or so) should have created – somewhere in the area of 23 million jobs, if the sequester scare numbers have any meaning.

  25. Stimulus and Bailouts.

    Where did all that money go?

    It went to Democrat contributors, organizations (ACORN), and unions — including billions of dollars to save or create jobs of government employees across the country.

    It went to buy the votes of GM and Chrysler so that their employees could keep paying union dues and vote Democrat.. It went to AIG so that Goldman Sachs could be bailed out (after giving Obama almost $1 million in contributions). A staggering $125 billion went to teachers (thereby protecting their union dues).

    All those public employees will vote loyally Democrat to protect their bloated salaries and golden pensions that are bankrupting America.

    The country goes broke, future generations face a bleak future, but Obama, the Democrat Party, government, and the unions grow more powerful.

    The ends justify the means.

    Add it up and you’ve got the perfect Marxist scheme.

  26. What a lame article. It’s titled “Down the Drain,” which implies that the money was wasted. But the substance is that determining whether there was any value to the stimulus is almost impossible to tell.

    Let’s try some reason:
    1) The administration says the stimulus worked.
    2) It is very difficult to tell if the stimulus worked.
    3) Therefore, the stimulus didn’t work.

    You really need to change the name of your magazine and web page.

  27. If you think Carrie`s story is unbelievable,, 5 weeks ago my cousins boyfriend easily made $6762 putting in a thirteen hour week from there apartment and the’re co-worker’s mother-in-law`s neighbour done this for 7-months and actually earned over $6762 part time from a laptop. apply the guidelines at this site
    (Go to site and open “Home” for details)

  28. After six months of being unemployed your chances of getting a job drop by around 50%. Obama was giving subsidized health care and extended unemployment for 2 years. I believe he did this because he really wanted to help American’s that were struggling to get by. Ironically however what it did was give incentives to American’s to take their time to get another job. This in turn put millions of American’s into the “6+ month” category making them effectively un-employable. So by helping he wound up destroying the lives of millions of American’s who will never work again.

    Most people have heard the proverb about the fish i.e. give a man a fish and you feed him for a day. Teach a man to fish… Obama gave out a LOT of fish and now he has a lot of desperate people that need more fish.

  29. plan to build bathrooms. “We’ll put people back to work rebuilding

  30. plan to build bathrooms. “We’ll put people back to work

  31. as a plan to build bathrooms. “We’ll put people back to work

  32. million went to upgrading toilets and other sanitation

  33. fil5edma is your way to get help in ksa

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