Five myths about Obama’s stimulus

President Obama’s February 2009 stimulus bill, the American Recovery and Reinvestment Act, was a political disaster. It helped fuel the Republican revival of 2010 and now stars in Mitt Romney’s ads. The president even stopped uttering the word “stimulus.” But the $787 billion bill was one of the most important and least understood pieces of legislation in modern history. It was the purest distillation of what Obama meant by change, transforming our approaches to energy, education, health care, transportation and the economy, promoting long-term reinvestment as well as short-term recovery. Just about everything Americans think they know about it is wrong. Here are a few examples.

1. The stimulus didn’t create jobs.

A year after Obama signed the bill, the percentage of the public that believed it had created jobs was lower than the percentage that believed Elvis was alive. But at its peak, the Recovery Act directly employed more than 700,000 Americans on construction projects, research grants and other contracts. That number doesn’t include the jobs saved or created through its unemployment benefits, food stamps and other aid to struggling families likely to spend it; its fiscal relief for cash-strapped state governments; or its tax cuts for more than 95 percent of workers. Top economic forecasters estimate that the stimulus produced about 2.5 million jobs and added between 2.1 percent and 3.8 percent to our gross domestic product.

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The stimulus didn’t keep unemployment below 8 percent, as the Obama team predicted in an ill-advised report designed to help pass the bill. Unemployment soared past 8 percent before the stimulus even kicked into gear. It later became clear that the economy was free-falling much faster than experts realized at the time; the initial GDP estimate for the fourth quarter of 2008 was a recession-level negative 4 percent, later revised to a depression-level negative 8.9 percent.

But, as I detail in my new book on the stimulus, “The New New Deal,” the bill helped stop that free fall. Job losses peaked the month before it passed. The jobs numbers that spring, while grim, marked the biggest quarterly improvement in almost 30 years. The Recovery Act launched a weak recovery, but even a weak recovery beats a depression.

2. The stimulus was full of waste, pork and fraud.

Most of the Recovery Act consisted of straightforward aid to states and to the vulnerable, infrastructure spending, and tax cuts. Critics may call it “porkulus,” but the stimulus was also the first modern spending bill with no official legislative earmarks, the usual definition of “pork.” And after experts warned that 5 to 7 percent of the money could be lost to fraud, investigators documented only $7.2 million in losses through 2011, about 0.001 percent.

Of course, waste is in the eye of the beholder. But it’s telling that most Republican examples of stimulus boondoggles were either removed from the bill (sod on the Mall, smoking cessation), never in the package (mob museums, levitating trains to Disneyland) or wild distortions (The new Department of Homeland Security headquarters is not “government furniture”).

Yes, there was Solyndra, but its $535 million default represented only about 1 percent of the Recovery Act’s clean-energy loan portfolio, and independent reviewers have found that the overall portfolio is in fine shape. And Republican investigators have found no evidence that cronyism drove the Solyndra loan.

3. The stimulus should have been much bigger.

It’s true that a bigger stimulus would have provided a bigger economic jolt and accelerated the sluggish recovery. More public works projects would have produced more jobs; more state aid would have prevented more of the public-sector cutbacks that have slowed the recovery; more tax cuts would have directed more cash into your wallet. But there was no way Obama could have gotten another dime out of Congress.