Voters are skeptical, but White House report says $800B stimulus law working as promised

By Andrew Taylor, AP
Friday, October 1, 2010

White House: Stimulus law working as promised

WASHINGTON — President Barack Obama’s $800 billion-plus economic stimulus law may not be earning good grades with the public, but the White House claims it’s on track to produce the promised 3.5 million jobs.

Friday’s report says about two-thirds of the stimulus money has been spent via tax cuts or government spending and remarkably little of the money has gone out fraudulently.

The stimulus bill was passed in February of last year to try to reverse the worst recession since the Great Depression. The White House and many economists credit it with giving the economy a needed jolt. But Republicans say it’s been ineffective, citing a nationwide unemployment rate still hovering near 10 percent.

“We continue to show consistent progress on your commitment to create or save 3.5 million jobs by the end of calendar year 2010,” Vice President Joe Biden wrote in presenting the report to Obama. “In addition, over 95 percent of working families have seen their taxes lowered.”

The idea driving the stimulus bill was to inject demand into the economy through federal spending and tax cuts. The report says about $300 billion in spending has gone out for programs such as jobless benefits, government projects, and grants to states to ease layoffs of workers.

Another $243 billion has gone to businesses and individuals in tax cuts, including Obama’s signature “Making Work Pay” tax credit of $400 for individuals and $800 for couples.

The White House points to the nonpartisan Congressional Budget Office in claiming the stimulus is delivering as promised. But CBO’s latest estimates say the legislation may have been responsible for as few as 1.4 million jobs. The administration points to a 3.3 million jobs figure at the high end of the wide range offered in CBO’s August report.

The White House report also cites a study by noted economists Mark Zandi and Alan Blinder, who estimated that unemployment would have spiked to 11.6 percent by the end of this year had the stimulus measure not been passed.

Still, frustrated voters give the stimulus program low marks in opinion polls, such as a CBS News survey in July in which 56 percent of respondents said it had no impact, while 18 percent said it actually made the economy worse.

Republicans say the measure is a leading example of wasteful spending by Washington Democrats. And they hammer a White House prediction that the measure would limit unemployment to 8 percent.

“The administration predicted that unemployment wouldn’t rise above 8 percent if the trillion-dollar stimulus became law,” said Senate GOP Leader Mitch McConnell of Kentucky. “We know how that turned out.”

The White House counters that the stimulus program gave the economy a boost at a critical time and may have averted a catastrophe.

“Sometimes doing what’s right with the economy doesn’t poll well,” said press secretary Robert Gibbs. “My hunch is it wouldn’t poll well if we were in a Great Depression.”

The stimulus is winding down in many ways. The $400-$800 tax credit expires at the end of the year, and there’s little talk on Capitol Hill of renewing it as Obama wants. A small, but popular — even Mississippi GOP Gov. Haley Barbour salutes it — stimulus program that is credited with creating 250,000 subsidized jobs expired on Thursday, as Republicans blocked efforts to renew it.

But other pieces, such as unemployment insurance for the long-term jobless and aid to state governments and local school boards, have been renewed this year after much wrangling in Congress.

Some elements are still getting under way, such as high speed rail grants, federal building projects and billions to upgrade information technology for the health care sector.

Republicans have promised to try to roll back the measure if they take control of Congress, but that effort is unlikely to succeed so long as Obama wields his veto pen. And there’s much less money available to rescind than the $260 billion or so Republicans claim, since contracts have been let on much of the unspent money.

According to the report, just 0.2 percent of stimulus awards are under investigation for fraud, far less than is typical of other federal programs.

But Republicans such as Sen. Tom Coburn of Oklahoma point out dozens of kooky-sounding stimulus projects, such as $554,000 to replace the windows of a visitor center at Mount St. Helens in Washington State that was closed three years ago and nearly $90,000 to replace a five-year-old stretch of sidewalk in an Oklahoma town that led to a ditch.

But Friday’s Commerce Department report on construction spending cites a big jump in federal building projects for being responsible for reversing a slide in construction spending.

Construction spending edged up 0.4 percent in August following a 1.4 percent drop in July, the department said. While spending on government projects rose 2.5 percent, spending on private construction projects dropped to the lowest level in 12 years.

“Federal investments from the stimulus and other programs are protecting some construction workers from a devastating downturn in private construction activity,” said Ken Simonson, the chief economist for the Associated General Contractors of America.

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