Why Obama's Stimulus Plan Is Disappointing

Robert Samuelson is smart, thorough and nonpartisan. If he says Obama's stimulus fails by Obama's own measures everyone should listen.

Newsweek Voices - Robert J. Samuelson | Newsweek.com:
Obama's package is too focused on political goals and projects. The effect is to weaken the program's basic purpose--to jolt the economy.

Judged by his own standards, President Obama's $787 billion economic stimulus program, which he signed into law last week, is deeply disappointing. For weeks, Obama has described the economy in grim terms. "This is not your ordinary, run-of-the-mill recession," he said at his Feb. 9 press conference. It's "the worst economic crisis since the Great Depression." Given these dire warnings, you'd expect the stimulus package to focus exclusively on reviving the economy. It doesn't, and for that, Obama bears much of the blame.

The case for a huge stimulus, which I support, is that it's insurance against the possibility of a devastating downward economic spiral. Spending and confidence are tumbling worldwide. In the fourth quarter of 2008, the U.S. economy contracted at a nearly 4 percent annual rate. In Japan, the economy fell at a nearly 13 percent rate; in Europe, the rate was about 6 percent. These are gruesome declines. If the economic outlook is as bleak as Obama says (and it may be), there's no reason to dilute the upfront power of the stimulus. But that's what Obama's done.

His political choices compromise the program's economic effectiveness. Let's start with the numbers. The Congressional Budget Office (CBO) estimates that about $200 billion will be spent in 2011 or later—well beyond when it will do the most good. For starters, there's $8 billion for high-speed rail. "Everyone is saying this is [for] high-speed rail between Los Angeles and Las Vegas—I don't know," says Ray Scheppach, executive director of the National Governors Association. Whatever project or projects are chosen, the decision process, design and construction will occupy many years. It's not quick stimulus.

Then there's $20.8 billion for improved health-information technology—more electronic records and the like. Probably most people regard this as desirable, but here, too, changes occur slowly. The CBO expects only 3 percent of the money ($595 million) to be spent in fiscal 2009 and 2010. The peak year of projected spending is 2014 at $14.2 billion. Or consider the $5.8 billion in outlays for water-treatment plants. The CBO reckons that only 27 percent will be spent in 2009 and 2010.

Big projects take time. The reason they're included in the stimulus is that Obama and Democratic congressional leaders decided to use the legislation as a way of advancing many political priorities instead of just spurring the economy. At his press conference, Obama argued (inaccurately) that the two goals don't conflict. Consider, he lectured, the retrofitting of federal buildings to make them more energy-efficient. "We're creating jobs immediately," he said.

Yes—but not many...