How the $800B stimulus failed
From his new book, "Money Well Spent?" reporter Michael Grabell explains how bad planning and poor choices doomed the largest economic recovery program in history
By MICHAEL GRABELL
Last Updated: 5:03 AM, January 29, 2012
Posted: 10:45 PM, January 28, 2012
Vice President Joe Biden was eager to get moving. In office for only a month, the Obama administration had already passed a monumental economic stimulus plan to address the biggest downturn since the Great Depression.
Now, at the first implementation meeting in 2009, Biden — with a smudged Ash Wednesday cross still on his forehead — declared that the stimulus would "literally drop kick us out of the recession."
Officially called the American Recovery and Reinvestment Act, the $800 billion stimulus was the largest economic recovery program in history. Adjusted for inflation, it was nearly five times more expensive than the Works Progress Administration. It was bigger than the Louisiana Purchase, the Manhattan Project, the moon race and the Marshall Plan.
Economists and nonpartisan forecasting firms estimate that the stimulus created and saved more than 2 million jobs. It generated an unprecedented buzz around clean energy. A relatively small pot of education grants goaded 32 states to enact major reforms, such as tying teacher pay to student performance or lifting caps on charter schools. When the last dime is spent, more than 41,000 miles of roads will be paved, widened and improved; 600,000 low-income homes weatherized; and more than 3,000 rural schools connected to high-speed Internet.
But despite these achievements, the stimulus ultimately failed to do what America expected it to do — bring about a strong, sustainable recovery. The drop kick was shanked.
The stimulus was supposed to work like this: First, a flood of money in tax cuts, food stamps and unemployment checks would get consumers spending. A deluge of education and health-care money would stanch the bleeding in state budgets.
Then, a wave of "shovel-ready" infrastructure projects would kick in, creating new jobs repaving roads and making homes more energy efficient. As the economy got churning again, new investments in wind farms, solar panel factories, electric cars, broadband and high-speed rail would lead America out of the recession and into a 21st century economy competitive with the rest of the world.
But it didn't happen like that. The White House's economists, like nearly every forecaster, misread the recession. The state assistance wasn't enough to plug the budget holes and, in many cases, the school aid merely delayed rather than prevented teacher layoffs. Infrastructure projects took months longer to break ground than the public had been led to believe.
In reporting on the stimulus over three years, I have traveled to 15 states, interviewed hundreds of people and read through tens of thousands of government documents and project reports.
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