Economist Ed Lazear has a sobering analysis of the effects of the stimulus to date in today's Wall Street Journal. Lazear was chair of Pres. George W. Bush's Council of Economic Advisors and had the difficult task of explaining the Bush Administration's policies in 2008 as the economy verged on the brink of recession.
So far, just $56 billion of the $787 billion "stimulus" package has been "spent," he notes. But most of this money was really just a transfer from federal to state goverments. In truth, hardly any money has been really "spent" and most of the money has effectively shored up existing government programs. In contrast, by this time in 2008, the Bush Administration's stimulus package (rebate checks) had been completely disbursed to the tune of $80 billion.
The more sobering part of Lazear's article refers to what in my view is the real purpose behind the stimulus package: growing the size of government. As Lazear eloquently writes:
"Congress and the Obama administration have used the economic downturn as an excuse to expand the size of government. Calling it a stimulus, they have instead put in place a spending agenda that will unfold over the next two years. Although a little over one-third of the American Recovery and Reinvestment Act of 2009 goes to tax relief, the rest is in the form of spending programs that will be difficult to stop once they are up and running.
"Only a small share of the spending will occur in 2009, even though Keynesians would argue that stimulus spending should be frontloaded to kick-start growth. The Congressional Budget Office estimates that the largest share of the spending will occur in 2010, with the amount in 2011 being slightly larger than in 2009. Again, the timing exacerbates the problem: It will be tough to cut back on spending written into budgets as far out as 2011.
"Additional evidence that the Obama administration wants to expand government rather than stimulate the economy comes from the president's own statements about deficit reduction. When the budget came out, he announced a goal of reducing the deficit to around 4% of GDP by 2013, at which point the administration believes the economy will be fully recovered. Yet to keep the ratio of public debt to GDP constant, the deficit must actually stay below about 2.7%.
"For perspective, recall that the Bush deficit, which has been criticized for being too large, reached a peak of 3.6% of GDP in 2004. But it fell steadily to 1.2% of GDP by 2007 before rising again to about 3% after TARP."