As George Santayana famously said, “Those who do not remember the past are condemned to repeat it.” The Democrats and Speaker Nancy Pelosi are hoping your memory is very short. The stimulus package they are currently proposing is eerily similar to the one they passed in 2009, with promises of economic growth. That package failed miserably.
In 2009, Pelosi pushed through the American Reinvestment and Recovery Act, a $787 billion stimulus that ballooned to $831 billion. The Obama administration predicted that the stimulus would generate 4% economic growth per year from 2011 to 2013. That didn’t happen. The economy continued to limp along, averaging about 2% growth from 2009 to 2012. In fact, the economy slowed to 1.5% in 2012, with the fourth quarter of the year showing only 0.1% growth.
Vice President Joe Biden traveled around the nation saying the stimulus would usher in the “Summer of Recovery.” That also didn’t happen. Eighteen months after its passage, even National Public Radio acknowledged that the stimulus was a dud, running a headline that said, “‘Recovery Summer’ Ends with Economic Pothole.”
One of the main promises had been that the stimulus would create jobs — millions of jobs. Biden even predicted that the stimulus would create 250,000 to 500,000 new jobs per month. That didn’t happen. The unemployment rate at the time of passage was 8.3%, by October, it had gone up to 10%, and it was at 9% two years later. The unemployment rate would have been even higher if many people had not given up on finding a job and simply dropped out of the workforce. And the Congressional Budget Office reported that by the end of 2010, the impact of the stimulus on employment had already begun to decline.
The stimulus plan was supposed to be a plan that would help the middle class. But that didn’t happen either. Median household income actually declined through 2011. Steve Moore and Arthur Laffer cited a report from the Joint Economic Committee that said that after 2009, per capita income declined by thousands of dollars. In terms of economic growth, compared to the recoveries from eight previous recessions, the JEC ranked the Obama stimulus recovery dead last.
The stimulus plan was doomed to fail from the beginning because Pelosi did then what she is doing now — turning an economic stimulus bill into a massive expansion of welfare. In 2009, Pelosi argued that expanding food stamps and increasing unemployment compensation would quickly stimulate the economy. Instead, it quickly incentivized people to not go back to work. Instead of an economic recovery, we got what University of Chicago economist Casey Mulligan called the “redistribution recession.”
Mulligan pointed out the obvious: When people are paid more not to work, they rationally choose to work less or not to work at all. He estimated that with Pelosi’s expansion of welfare and unemployment benefits included in the 2009 stimulus bill, between 2 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 made at their previous job.
Ultimately, the end result of Pelosi’s welfare expansion in the bill was that job growth was lower than what the Obama administration had projected without passage of a stimulus bill.
Maybe Pelosi really believes that adding another massive increase in welfare spending will stimulate the economy, even though the failure of the 2009 stimulus should instruct her and the rest of Congress otherwise. But I doubt that is what she is trying to do. What she is trying to do is buy votes and broaden her party’s base by making millions of people more dependent on Democrats for their livelihood. She obviously believes that is a good plan for the Democrats going into the fall elections, but it is a horrible plan for those struggling to get their lives back to normal.
If we are smart, we will learn from the past, recognize how Pelosi’s increases in welfare spending undermined the 2009 stimulus, and hopefully avoid turning this present stimulus attempt into another “redistribution recession.”
Gary Palmer represents Alabama’s 6th Congressional District in the U.S. House of Representatives.
