The Obama-era stimulus package pumped hundreds of billions of dollars into the U.S. economy to stave off the Great Recession. Kudlow, a former CNBC pundit, dismissed it as “all spending” that went mostly to “welfare programs and social spending.”
As the new director of the National Economic Council, Kudlow goes on TV now not as a talking head but as President Trump’s lead economic adviser. The CNN interview, with Erin Burnett, was one of his first appearances speaking for the White House.
Did he get his facts right while describing the stimulus package?
President Barack Obama signed the American Recovery and Reinvestment Act (ARRA) weeks after taking office in 2009. The law provided $787 billion in stimulus funds over several years. Congress later added more funding in 2012, for a total stimulus of $840 billion, according to a now-defunct government website called Recovery.gov. (The Fact Checker pulled up a copy from 2015 using the Internet Archive Wayback Machine.)
In 2007 and 2008, plummeting home values, spiking energy prices, chaos in the banking and financial sectors, and a crisis in the auto industry were some of the leading factors causing the U.S. economy to go haywire and into recession.
“In response, policymakers quickly moved to prevent the instability in housing and financial services from spilling over into the broader economy,” according to a 2009 report from the Congressional Research Service. “Looking to the future, members of Congress and the Obama administration sought additional mechanisms to stimulate economic activity. Various approaches were considered to ensure that an economic stimulus package could reach many different segments of the economy, provide a sustained economic boost, and widespread job growth. Some economic stimulus proposals included infrastructure spending, revenue sharing with states, middle class tax cuts, business tax cuts, unemployment benefits, and food stamps.”
They ended up with the ARRA, which did a little of everything.
Kudlow described this stimulus package as “all spending,” but it was not. Of the total $840 billion stimulus, $290.7 billion, or 35 percent, was designated as tax relief. This included dozens of measures, such as a payroll-tax holiday, tax credits for first-time home buyers and for people buying electric vehicles, increased exemptions from the alternative minimum tax, credits and incentives geared at businesses and infrastructure projects, and COBRA health-care benefits for laid-off workers. Although the ARRA did not modify tax rates set in statute, this $290.7 billion reduced effective tax rates across the country.
Here’s how Obama’s Council of Economic Advisers described the stimulus package in a February 2010 report:
“The final package was very well diversified. Roughly one-third took the form of tax cuts. The most significant of these was the Making Work Pay tax credit, which cut taxes for 95 percent of working families. Taxes for a typical family were reduced by $800 per couple for each of 2009 and 2010. Another provision of the bill provided roughly $14 billion for one-time payments of $250 to seniors, veterans, and people with disabilities. The macroeconomic effects of these payments are likely to be similar to those of tax cuts.”
The report added that “businesses received important tax cuts as well,” most significantly “an extension of bonus depreciation, which reduced taxes on new investments by allowing firms to immediately deduct half the cost of property and equipment purchases.”
The White House and the National Economic Council did not respond to our request for comment.
Kudlow also said the stimulus package was “not a growth prescription” because “most of it was spending for welfare programs and social spending.”
This is another suspect claim. We once again turn to the defunct website at Recovery.gov.
Of the total $840 billion stimulus, 52 percent was set aside for tax-relief measures and spending for transportation, infrastructure, energy, environmental, research and development, and a range of administrative programs.
Spending for all other categories represented 45 percent of the total $840 billion stimulus. This included some items that could fairly be described as “welfare programs and social spending,” such as $105.7 billion to shore up Medicaid and Medicare and $14 billion for housing. But it also included $94 billion for education, $5.7 billion for public safety, $1 billion for agriculture, and billions of dollars for other programs that had nothing to do with welfare and could only tenuously be described as “social spending” (or “social services,” which Kudlow possibly meant to say).
It’s important to keep in mind that the ARRA combined hundreds if not thousands of different initiatives into one massive stimulus package. So there are many ways to slice and dice the numbers on Recovery.gov. The bottom line of our analysis is that it’s hard to see how “welfare programs and social spending” could fairly be made to account for more than half of the ARRA, as Kudlow claimed.
Lastly, we feel compelled to point out that Kudlow made a couple more factual errors mere seconds after these remarks. He said “the Obama stimulus package … was, what, a trillion dollars at the beginning.” It was actually $787 billion at first and rose to $840 billion.
Kudlow then claimed Obama “had a chance to lower taxes, it was under discussion, but he never did.” Aside from the tax-relief measures in the stimulus, Obama signed several broad-based tax cuts into law.
The Pinocchio Test
Kudlow claimed the Obama-era stimulus “was all spending.” But 35 percent of the $840 billion package was devoted to tax relief.
Kudlow dismissed the stimulus because “most of it was spending for welfare programs and social spending.” But a fair reading of the breakdown of ARRA funds on Recovery.gov contradicts his claim.
Kudlow said Obama signed a trillion-dollar spending bill. But Obama signed a $787 billion stimulus package that later grew to $840 billion.
Kudlow said Obama never cut taxes. But he did — several times.
The irony here is that the president’s top economic adviser should know his stuff, especially on prime-time TV. For his flawed analysis of the ARRA, Kudlow earns Four Pinocchios.
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