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A report card on the economic stimulus

One year after President Barack Obama signed the economic stimulus bill into law, Republicans and Democrats are still squabbling. Republicans say that the $862 billion program is wasteful and poorly managed and that it failed to create many — if any — jobs. Democrats say it created 2 million jobs and kept the economy from a catastrophic collapse.

What's the truth? On the one-year anniversary, we decided to take a closer look at two of the most controversial questions about the stimulus. How many jobs has the stimulus created? And how and where is all that money going?

How many jobs?

The stimulus, officially known as the American Recovery and Reinvestment Act of 2009, includes an array of tax cuts and spending programs designed to pump money into the economy and reverse the recession.

In a speech to mark the anniversary Wednesday, Obama reiterated a claim he made in his State of the Union address, that the stimulus has already saved or created 2 million jobs.

White House officials have repeated that for months. And yet, a recent CBS News/New York Times survey found that just 6 percent of the American public believes the stimulus has created jobs (an additional 41 percent believes that while it hasn't yet created jobs, it will). So there's a huge disparity between what the public believes and what the White House contends.

One possible factor: the unemployment rate, which remains about 10 percent. Republicans often cite that figure as evidence the stimulus has failed.

As with virtually any economic issue, there's disagreement among economists on how many jobs the stimulus created.

To count the jobs created by the stimulus, they essentially have been comparing two numbers: the actual employment statistics from the federal government, and an estimate of what those employment numbers would have been had there been no stimulus. The gap between these two figures represents the number of jobs created or saved by the stimulus.

In a report released on Jan. 13, the president's Council of Economic Advisers estimated that between 1.77 million jobs and 2.07 million jobs were created or saved by the stimulus through the fourth quarter of 2009.

To back up that claim, the council's report cited four independent analyses. These estimates were by the Congressional Budget Office, an independent agency that does the number-crunching for Congress, as well by three private-sector economic-analysis firms. Here's what those groups found:

• CBO: Between 800,000 jobs and 2.4 million jobs.

• IHS/Global Insight: 1.25 million jobs

• Macroeconomic Advisers: 1.06 million jobs

• Moody's 1.59 million jobs

So Obama has cherry-picked the most favorable estimates. For him to be right about 2 million jobs having been created or saved would mean using the highest end of the administration's own range, or the highest end of the CBO's range.

So the president's claim is on the generous side, but most independent economic forecasters agree the stimulus has created something close to that number so far.

"Our short answer is that the stimulus has had a big impact, and has helped bring the economy out of recession," said Gus Faucher, director of macroeconomics at Moody's

While unemployment rose through 2009, Faucher wrote in a December report, "Job losses would have been much more severe without the government's support. Yet a political problem remains; although the economy is expanding, it is still losing jobs on net. … The stimulus is working, but we won't see the results in the labor market until early (2011)."

How much is being spent and where?

First, the cost.

In January, the nonpartisan Congressional Budget Office revised its estimate of the 10-year cost of the stimulus to $862 billion ($75 billion more than originally anticipated).

From Day 1, the White House has stressed the need to get that money spent as quickly as possible to try to jolt the flailing economy. And so the White House has been fond of noting that nearly 70 percent of the stimulus act spending has already been obligated to specific programs and projects. Critics, however, say less than a third of the stimulus dollars have actually been spent.

They're both right. While money for some projects has been "obligated," it could take years in some cases for that money to actually be spent — and get into the economy.

The numbers can be sliced different ways. But here are the basics:

Although people often think of new highways and public works projects as the meat of the stimulus, projects like that only account for a portion of the recovery act.

Nearly a third of the cost of the stimulus, $288 billion, comes via tax breaks to individuals and businesses. The tax cuts aren't so much spending as money the government won't get — so it can stay in the economy. Of that $288 billion, the stimulus has resulted in $119 billion worth of tax breaks so far.

The stimulus also has $499 billion in spending. That includes $226 billion for projects such as new roads and high-speed rail; $273 billion in payments to state governments for things such as hiring teachers and police officers, and for services such as extended unemployment insurance and health coverage.

According to an analysis by Pro Publica, an online news service, $179 billion of the total stimulus has actually been spent. Another $154 billion has been committed, or is "in the process" of being spent.

The CBO also examined the numbers and found that about $200 billion of the stimulus (including payments, projects and tax cuts) was spent in 2009. More than double that, $404 billion will be spent in 2010. And $258 billion more will be spent in the eight years after that.

The Obama administration says it has tried to strike a balance.

In an annual report on the progress of the stimulus on Feb. 17, the Obama administration said, "By design, it includes some investments that spent out immediately, and others that kick in later so that the stimulating affects of the act support a more sustained recovery." | St. Petersburg Times
Sorting out the truth in politics

The statement

"In the three months before the (stimulus) act took effect, America lost 750,000 jobs a month. In the last three months, we've lost about 35,000 jobs a month."

— Vice President Joe Biden on Wednesday in 'USA Today'

The ruling

The vice president is slightly off on the number of monthly job losses from before the stimulus plan took effect, but he is on the mark for job losses more recently. His claim is Mostly True.

The statement

"So far, the Recovery Act is responsible for the jobs of about 2 million Americans who would otherwise be unemployed. ... [And] the Recovery Act is on track to save or create another 1.5 million jobs in 2010."

— President Barack Obama in an address Wednesday

The ruling

Independent economists agree that the stimulus has saved or created upwards of 1 million jobs, and that the plan will likely create another million or so jobs in 2010, but within the broad range of expert opinion, Obama chose from the high side. The numbers could easily be less than what he suggests. We rate his claim Half True.

A report card on the economic stimulus 02/17/10 [Last modified: Wednesday, February 17, 2010 10:59pm]
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