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Evidence of stimulus’ effect mounting

by Policy in Practice on February 16, 2010

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With the Obama Administration and the Republican Party trading jabs over the efficacy of last year’s stimulus package, an unfortunate truth seems to be settling in for the GOP: The stimulus worked, and is continuing to have a positive effect.

Pick just about any area of the economy and you come across the stimulus bill’s footprints.

In the early months of last year, spending by state and local governments was falling rapidly, as was tax revenue. In the spring, tax revenue continued to drop, yet spending jumped — during the very time when state and local officials were finding out roughly how much stimulus money they would be receiving. This is the money that has kept teachers, police officers, health care workers and firefighters employed.

Then there is corporate spending. It surged in the final months of last year. Mark Zandi of Economy.com (who has advised the McCain campaign and Congressional Democrats) says that the Dec. 31 expiration of a tax credit for corporate investment, which was part of the stimulus, is a big reason.

The story isn’t quite as clear-cut with consumer spending, as skeptics note. Its sharp plunge stopped before President Obama signed the stimulus into law exactly one year ago. But the billions of dollars in tax cuts, food stamps and jobless benefits in the stimulus have still made a difference. Since February, aggregate wages and salaries have fallen, while consumer spending has risen. The difference between the two — some $100 billion — has essentially come from stimulus checks.

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The jobless rate is now expected to begin falling consistently by the end of this year.

For that, the stimulus package, flaws and all, deserves a big heaping of credit. “It prevented things from getting much worse than they otherwise would have been,” Nariman Behravesh, Global Insight’s chief economist, says. “I think everyone would have to acknowledge that’s a good thing.”

What’s resulted, then, is that many Republicans have taken credit for the positive effects of the stimulus package in their home states and districts, while lamenting the stimulus on the national stage. The President noted as much when he met with GOP Congressmen a few weeks back; independent factfinders have begun to chime in on this, as well. As The Wall Street Journal reports:

More than a dozen Republican lawmakers supported stimulus-funding requests submitted to the Department of Labor, the Environmental Protection Agency and the Forest Service, in letters obtained by The Wall Street Journal through the Freedom of Information Act.

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Rep. Paul Ryan, a Wisconsin Republican who called the stimulus a “wasteful spending spree” that “misses the mark on all counts,” wrote to Labor Secretary Hilda Solis in October in support of a grant application from a group in his district which, he said, “intends to place 1,000 workers in green jobs.” A spokeswoman for Mr. Ryan said the congressman felt it was his job to provide “the basic constituent service of lending his assistance for federal grant requests.”

Republican Reps. Sue Myrick of North Carolina and Jean Schmidt of Ohio sent letters in October asking for consideration of funding requests from local organizations training workers for energy-efficiency projects.

In November, Ms. Schmidt said in a statement, “It is time to recall the stimulus funds that have not been spent before the Chinese start charging us interest.” Aides to the congresswomen said they had always supported local organizations in their requests for federal funding.

None of the projects requested by the three House members received awards in funding decisions announced in January.

The Environmental Protection Agency received two letters from Sen. John Cornyn of Texas asking for consideration of grants for clean diesel projects in San Antonio and Houston. Mr. Cornyn is the chairman of the National Republican Senatorial Committee.

One of the letters was signed jointly with Republican Sen. Kay Bailey Hutchison, also of Texas. The letter said that the Port of Houston Authority “has informed me of the positive impact this grant will have in the region by serving as a foundation for PHA’s Clean Air Strategy Plan, creating jobs, and significantly reducing diesel emissions.” Houston received millions of dollars in diesel funding.

The agency also appeared to have received eight identical letters from Republican Sen. Bob Bennett of Utah recommending infrastructure projects in his state, seven of which were sent before stimulus legislation was passed by Congress.

Spokespeople for Mr. Cornyn and Mr. Bennett said they were just making sure their states received part of the spending once it had been agreed upon. Ms. Hutchison’s office didn’t respond to a request for comment.

The entire congressional delegation of Alabama, including its two Republican senators, wrote to then-Forest Service Chief Gail Kimbell asking for $15 million for cogongrass eradication and control programs in the state. The state ended up getting a $6.3 million grant.

Republican Richard Shelby, the state’s senior senator, called the stimulus package “the socialist way” while it was being debated. A spokesman didn’t respond to a request for comment.