The Stimulus Plan: Success or Failure?

Republicans on Capitol Hill have become increasingly vocal in calling the stimulus package a failure. Is there any validity to their opinion?

While it's difficult to talk about any government program without invoking political biases, it is a good question to ask.

When the stimulus package was passed, one of the primary criticisms -- outside of the dollar amount -- was that too much of it was geared towards 2010 rather than having an immediate impact. Still, parts of it did have a short-term impact such as the reduction in taxes and lengthened unemployment benefits.

Perhaps the best measure of judgment is the economy, which is both worse and better than it was when the stimulus package was passed.

The pace of contraction has slowed dramatically. The overwhelming majority of economic indicators are headed in the right direction. But the economy is still headed downhill. We're losing jobs and will continue to do so for several more months.

Consumers remain concerned about their financial condition. We saw their frugality in the June sales numbers for retailers like J.C. Penney (JCP). They also remain uncertain about the future -- a key reason why the recent readings on consumer confidence fell.

This said, it's important to realize that the stimulus package has not operated in a vacuum.

The Treasury Department and the Federal Reserve took unprecedented steps to support the banking system. These measures have provided a clear benefit to Fifth Third (FITB), Wells Fargo (WFC) and many others. Though there is plenty of criticism to be levied here, these actions did prevent further disruptions to the financial system from occurring.

The government was also very involved with Chrysler and General Motors (GMGMQ.PK). The speed at which GM has gone through bankruptcy is not only astounding, but it has also prevented a major disruption to the automotive industry from occurring. Again, plenty of criticism to be made, but if you're a shareholder in Ford Motor (F) or Toyota (TM), you've benefited.

So, is the stimulus working or is it a failure? Simply put, we don't know the answer yet. And we don't truly know what the economy would have looked liked if there was no stimulus package or if an alternate version had passed.

What we do know is that it takes time to emerge from a severe recession. Therefore, leave the politics to Washington and give the stimulus package more time before passing judgment.

Comments

[Falconflight:]

If only 8% or so of the "Stimulus" bill has actually been spent to date, one might need to "suspend disbelief" in order Not to cogitate the bill's impact or lack thereof.

Jul 14 11:50 AM

[joepasc:]

Of course businesses will start to hire people when their taxe rates and healthcare costs will rise dramatically. They wouldn't think of laying off more people and putting off hiring until corporate taxes are lowered as an incentive. Right?

Jul 14 11:51 AM

[epeon:]

The stimulus package wasn't anything of the sort. If you actually looked at it, you realized that not much of it was being spent in 2009 and most of it was payments to democratic special interests. I would not have minded so much, if the stimulus package was going to build roads and bridges (i.e. things we need). But, instead, it was going to democratic special interests. At the end of the day we will have a big bill and little constructive to show for it.

Jul 14 11:55 AM

[jack kreg:]

"one of the primary criticisms"; no, the primary criticism is that FED $$ borrowed from Asia is going to prop up failed State governments, like CA, where gov workers have been widely overpaid and overcompensated in retirement for decades.
Now, the State gov's are getting bailed out, with much of the stimulus going to pay gov workers, and not creating new jobs.

But what else would you expect from a socialist run Fed government, Pelosi/Reid/Obama all pushing socialist programs,
Hence the stimulus will surely not creat lasting jobs in the private sector.

Jul 14 11:59 AM

[Neil459:]

Expanding handouts, expanding health care, expanding &*&%^$ is just payback for votes and is not sustainable.

There is no investment in our future only waste spending in return for popularity and votes.

Jul 14 12:30 PM

[awake09:]

You are discussing TARP payments, both to banks and to GM and Chrysler... this was NOT "stimulus". Bush started TARP, so the credit you seem to be giving goes to him, not Hussein.

Jul 14 12:58 PM

[conceptwizard:]

I agree with the sentiment that it is to early to tell but I will add that the intial Bush stimulus was to little at 100 million to taxpayers. The current stimulus wont be hitting until 2010 the way it is being dispersed so slowly. This is a little to late in my opinion. The Stimulus wont have great effect anyway as it is a debt/deleveraging/dollar depression we are in, and will be in for a long time.

Jul 14 01:33 PM

[markfl:]

It's saved few jobs this year, and 2010 isn't looking too good either. Cut the payroll tax Obama! Rescind $100 billion of the stimulus and just cut the FICA. They should have done it last year.

Jul 14 01:49 PM

[User 447550:]

Seems to me the money is timed to impact at election times. Pretty smart to be able to buy an election with tax payer money.

Jul 14 02:30 PM

[Neil459:]

Another ignorant ideologue. The Democrats were in charge of Congress. In the United States its Congress that passes laws. Sure Bush could have vetoed it, and he supported it, but thats not the same as passing it into law. Words have meaning. A Democratic Congress made it law.

On Jul 14 12:58 PM awake09 wrote:
> You are discussing TARP payments, both to banks and to GM and Chrysler...
> this was NOT "stimulus". Bush started TARP, so the credit you seem
> to be giving goes to him, not Hussein.

Jul 14 03:41 PM

[awake09:]

I take exception to that characterization. I am painfully AWARE Democrats owned Congress then. But for simplicity's sake, and as is the typical case in political reports, the one who signs a bill OWNS a bill... and the consequences. So think before flaming a relative fact.


On Jul 14 03:41 PM Neil459 wrote:

> Another ignorant ideologue. The Democrats were in charge of Congress.
> In the United States its Congress that passes laws. Sure Bush could
> have vetoed it, and he supported it, but thats not the same as passing
> it into law. Words have meaning. A Democratic Congress made it
> law.
>
> On Jul 14 12:58 PM awake09 wrote:

Jul 14 07:15 PM

[User 447741:]

Wow! Based on these comments I would thing Republicans walk on water; however, I know that isn't true, and so does everyone else that lives in reality. Otherwise, the Republicans wouldn't have been voted out of power in the Executive and Legislative branches. Face it the Republicans lack leadership, and if the best that the Republicans can do is Sarah Palin, then God help them. The only thing going for Sarah Palin is she is an attractive woman in her forties.

As far as what is going on with the economy there is enough blame to go around for politicians and businessmen and the American people. I can name quite a few reasons for the meltdown of the economy, and personally steps should be taken to identify the problems, and then resolve the problems by way of regulations and other means because I for one do not want to keep going through this crap over and over again. I am tired of making incompetant leaders (financial CEO's) rich.

Jul 14 08:22 PM

[Peter Bowers:]

I might have found some sympathy with your general thoughts. That is until you limited incompetent leaders to those of "financial COE's".
Your anger has no depth or reach. Just another whiner.


On Jul 14 08:22 PM User 447741 wrote:

> Wow! Based on these comments I would thing Republicans walk on water;
> however, I know that isn't true, and so does everyone else that lives
> in reality. Otherwise, the Republicans wouldn't have been voted out
> of power in the Executive and Legislative branches. Face it the Republicans
> lack leadership, and if the best that the Republicans can do is Sarah
> Palin, then God help them. The only thing going for Sarah Palin is
> she is an attractive woman in her forties.
>
> As far as what is going on with the economy there is enough blame
> to go around for politicians and businessmen and the American people.
> I can name quite a few reasons for the meltdown of the economy, and
> personally steps should be taken to identify the problems, and then
> resolve the problems by way of regulations and other means because
> I for one do not want to keep going through this crap over and over
> again. I am tired of making incompetant leaders (financial CEO's)
> rich.

Jul 16 01:13 PM