The real price tag for stimulus: Between $1 trillion and $1.7 trillion
There’s been a lot of discussion over whether we should have had a smaller or larger stimulus package. But a lot of these arguments leave a key question unanswered: How much stimulus did we actually pass?
There was the American Recovery and Reinvestment Act, of course. That was the big gun. But after that, there were dozens of smaller measures passed. For instance: The White House only put a single year of expanded unemployment insurance into the original stimulus. They did that, in part, because they expected they would be able to get unemployment insurance extended on its own. That allowed them to show a lower number for ARRA, but more stimulus in total.
On the other hand, there were policies passed under the guise of stimulus that were nothing of the kind. In the Senate, for instance, a $70 billion patch to the Alternative Minimum Tax was added to ARRA. That meant that the stimulus bill, so often reported as providing a $787 billion boost to the economy was, at best, only providing $717 billion. And since plenty of provisions in the stimulus were long-term investments, the real boost was lower even than that.
Kathy Ruffing of the Center on Budget and Policy Priorities was kind enough to go back into the Obama baseline we had created and mark which items were stimulus and which weren’t. The latest estimate on ARRA is that it cost — including the AMT patch — $821 billion. Subsequently, we passed another $383 billion in items that could properly be seen as stimulus or recovery measures — think the payroll tax cut, extensions of unemployment benefits and the first-time home buyer’s tax credit, that sort of thing.
So that gives us $1.2 trillion in total stimulus, the vast majority of which fell between 2010 and 2012. Then there are a couple of judgment calls that need to be made. Was the extension of the Bush tax cuts a stimulus measure? Many Democrats and economists argued that the reason for extending them was to protect the economy at a time of weakness. But virtually no one considered them an ideal stimulus measure. Which puts them in an odd gray zone. But if you count them, then that adds about $432 billion to the total. If you say the second AMT patch — passed in late-2010 — is also stimulus, that adds another $130 billion to the total.
So I’d say a reasonable range for the amount of stimulus we actually passed is between $1 trillion, if you use a narrow definition of stimulus and remove measures like the AMT patch that were called stimulus but weren’t actually stimulus, and $1.7 trillion, if you want to use the most expansive definition possible and also include every policy passed to keep taxes low.
To put this in perspective, the Congressional Budget Office estimates the output gap — the economic hole the stimulus was trying to fill — at about $4 trillion, of which about $1 trillion was filled by the stimulus.