Left-leaning economists often argue that the $800 billion American Recovery and Reinvestment Act was too small and that more stimulus is needed to get the economy going again. The real amount of fiscal stimulus pumped into the economy, however, may be much higher.
Tom Firey of the libertarian Cato Institute estimates that the U.S. has dumped at least $2.5 trillion of fiscal stimulus into the economy since 2008.
“If you sum it all up, we’ve pumped an awful lot of fiscal stimulus into the economy since this recession started. Far more than anyone wants to acknowledge,” Firey told The Daily Caller News Foundation in an interview.
“I’ve been watching the debate over stimulus measure since ARRA, since early 2009 … and it seems like each time a measure was passed, it was like nothing had preceded it and nothing would come after it,” he continued. “And so I started tracking them.”
Firey tracked fifteen pieces of legislation that were passed since 2008, including the 2009 stimulus bill, unemployment insurance extensions and the payroll tax cuts.
Some of the bills tracked by Firey were measures explicitly aimed at stimulating the economy, like the 2009 stimulus bill, by borrowing money to spend now, while paying it back down the road.
Other bills, like the bills extending unemployment insurance, were not explicitly intended to be stimulus measures, but Firey argues that they were in effect stimulus measures because they borrowed and spent money now, rather than redirecting money the government already has.
“Some of this legislation can have multiple intentions,” Firey said. “For me, it was important to show this was also a form of fiscal stimulus, and was also intended to be a part of fiscal stimulus.”
Economist and New York Times columnist Paul Krugman and former President Bill Clinton have both argued that the 2009 stimulus package was too small.
“[G]iven reasonable projections of the economy’s path in January 2009, the proposed stimulus just wasn’t big enough,” Krugman wrote.
“I think the stimulus did as well as it could have done — there just wasn’t enough of it,” Clinton told reporters in June of last year.
To this, Firey asks, if $819 billion wasn’t enough, how much is needed?
“My question then becomes, is there ever a point where it is adequate? Is it even possible?” he asked. “How much is enough?”
Art Laffer, economist and former economics adviser to President Ronald Reagan, also puts the true amount of stimulus spending much higher than $819 billion — at more than $4 trillion.
“Federal government spending as a share of GDP rose to a high of 27.3% in 2009 from 21.4% in late 2007,” Laffer wrote in the Wall Street Journal. “This increase is virtually all stimulus spending, including add-ons to the agricultural and housing bills in 2007, the $600 per capita tax rebate in 2008, the TARP and Fannie Mae and Freddie Mac bailouts, “cash for clunkers,” additional mortgage relief subsidies and, of course, President Obama’s $860 billion stimulus plan that promised to deliver unemployment rates below 6% by now.”
“Stimulus spending over the past five years totaled more than $4 trillion,” he concluded.
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