We recently reached the two-year mark of President Obama’s economic stimulus law. But based on the reaction from Capitol Hill, there was little reason to celebrate.
To mark the occasion, Rep. Jim Jordan (R-OH) held a House Oversight and Government Reform Committee hearing with Heritage’s J.D. Foster, George Mason University economics professor Russell Roberts, and Stanford University economics professor John Taylor.
Jordan intentionally left two empty seats as placeholders for Christina Romer and Jared Bernstein, architects of the $787 billion plan. Both declined to attend and Jordan turned down an offer from the Obama administration to send replacements.
Their absence resulted in a “chorus” of Keynesian stimulus condemnation.
Heritage’s Foster broke down the stimulus with a simple bathtub analogy: “Suppose you pour a bucket of water into a bathtub. You would expect the level of the water to rise. But where did the water in the bucket come from? It came from dipping it into the bathtub. You may make a splash, but when the water settles, in terms of the water level nothing will have changed.”
During his testimony, Taylor honed in on the fallacy that the legislation had much of anything to do with infrastructure spending, one of Obama’s top selling points about the stimulus. Taylor argued that the government’s own data proved that little of the stimulus funds went to infrastructure projects, while most of the money sent to the states was not used to increase spending but instead used to reduce the amount of borrowing or other spending cuts, thus delaying the necessary state fiscal consolidations. He argued that with respect to infrastructure, the modest amounts actually spent reflected the fact that government “cannot get money out the door fast enough.” The lengthy amount of time necessary to get these so-called “shovel ready” projects off the ground prevents them from being an immediate economic boon.
In an act of political theater, Rep. Elijah Cummings (D-MD) went through a rapid-fire round of questioning to prod the “chorus of folks saying the same thing.” He accepted only yes or no answers for seven straight questions that narrowly focused on the “benefits” of the stimulus: Did money for small businesses help those small businesses? Did a boost in paychecks help that person’s family? Did guaranteed loans to farmers and ranchers help farmers and ranchers?
The panel mostly repeated the same answer to each question: Yes, it helped those individuals and businesses that got the money, but it did not help the economy overall. Cummings did not appear pleased by these answers, which plainly avoided the simple trap he had hoped to set.