A Stimulating Question

Who: Ted Kaufman
What: "Government Stimulus is the Way Forward", Cagle Post
When: October 31, 2011

Most of the media coverage has been about the stalemate between the 236 of the 242 Republican members of the House of Representatives who have taken an oath to never, under any circumstances, raise taxes and Democratic members who refuse to negotiate on entitlement spending until new revenue is part of the solution.

The even bigger, more fundamental argument between the two sides, however, is whether or not the government has any role at all in moving the country out of the recession.

One side says the American Recovery and Reinvestment Act of 2009—the stimulus bill—was a complete failure.

Yet, as I have pointed out in previous columns, in the quarter the ARRA passed, the Dow Jones average started to climb and has never looked back. The precipitous decline in jobs—a loss of over 700,000 a month when the bill was passed—was turned around. Although the numbers have never been high enough, we have seen positive job growth. GDP, which was falling, also moved into positive ground.

The truth is that the ARRA helped, but the economy is still in trouble because we were in even worse shape back in early 2009 than we thought at the time. The size of the stimulus—the largest that could pass Congress—was simply not ambitious enough.

My question for those who believe otherwise is this: If there is no government action, why will the economy recover? Because of the private sector?

Ted Kaufman is a former aide to Sen. Joe Biden, and was appointed to complete the term when the senator accepted the opportunity to run as vice president. He also served as the second chair of the Congressional Oversight Panel—succeeding Elizabeth Warren—assembled under the Bush-era Emergency Economic Stabilization Act of 2008, more widely known as TARP.