Like it or not, the president and congressional Democrats have their political hides nailed to initiatives like the American Recovery and Reinvestment Act, more commonly known as the stimulus package, approved in February 2009. The bill spent $787 billion, an amount that shocked and worried many Americans given the deficits that mounted during the previous eight years and the fact that tax revenue was drying up because of the recession.
But it was the recession that prompted the stimulus. With the economy shedding jobs at a rate of 700,000 a month when President Barack Obama was inaugurated, the choice lay between doing nothing — letting the market work — and the federal government intervening.
The “do nothing” option was too frightening to contemplate. Had Sen. John McCain been elected in 2008, it is safe to assume he would have worked to pass some sort of stimulus package. The federal government is the only force that can intervene during such financial catastrophes. Most Americans understood that during the Great Depression years; not as many understand it now.
Granted, putting $787 billion on the nation’s credit card is a scary proposition. But history proves that such an investment is a safe one. Getting money circulating around the economy encourages banks to lend and consumers to buy, which in turn saves or creates jobs.
The Obama administration now must prove a negative: that without the stimulus, the economy would have slid over the cliff into a depression. That’s like trying to prove that the high-end tires you purchased for your car saved you from crashing off the icy road last winter. Maybe the cheap tires would have been good enough; maybe not.
And so Americans remain skeptical about the stimulus, and wary of another federal spending bill. Part of the problem lies with the president and Democrats. They did not effectively explain the consequences of inaction. The auto industry and bank bailouts — the latter approved by President George W. Bush — added to the perception that high fliers were being saved on the back of the middle class. But the ARRA was needed, and in fact, a good case can be made that more should have been spent.
An interesting exchange here at the Bangor Daily News illustrates the ARRA’s perception problems. A recent letter to the editor defended the ARRA and listed some of the local beneficiaries. The owner of one of the businesses mentioned called the newspaper to say it had not gotten a stimulus loan. Further investigation revealed that a Small Business Administration line of credit the company secured — essential for most businesses —actually was funded through the ARRA. The business owners were unaware of the link with stimulus funds.
And that illustrates the problem with initiatives like the ARRA. Maybe that Maine business would have gotten a line of credit without the ARRA; maybe not. The business might have survived the recession without the line of credit, or it might not have.
What is important is that it and thousands of other businesses across the country did get money because of the ARRA, allowing them to keep workers on the payroll.