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Anatomy of a Success

Despite what you may have heard, the “stimulus” has worked.

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If you call something a "failure" often enough and loud enough, the public and the media will believe you — even if it's not true.

This, unfortunately, has been the case with respect to the federal government's response to the 2007-09 fiscal crisis now known as the Great Recession.

To review: In October 2008, in its initial response to the crisis, Congress, encouraged by the Bush administration, passed the Troubled Asset Relief Program (TARP) — sometimes called the "bailout." Then, in early 2009, Congress, encouraged by the Obama administration, passed the American Recovery and Reinvestment Act (ARRA) — often referred to as the "stimulus."

Since then, many politicians and pundits have vilified both TARP and ARRA, often conflating the two into the single term "stimulus" — a word they tend to say with a sneer. "Stimulus failure, stimulus failure, stimulus failure!" they shout. Indeed, they have so demonized the word "stimulus" that even Democratic candidates are afraid to use it while running for office this year.

And yet — here's the surprise — by every important economic measure, TARP and ARRA together have been successful. Hugely successful. Simply put, these two "stimulus" acts saved our nation's economy — created jobs by the millions, added trillions to the gross domestic product, and prevented the deficit from being twice as large as it would be without them.

These are the facts:

According to the nonpartisan Bureau of Labor Statistics, the U.S. economy was losing more than 750,000 jobs per month in the depth of the crisis. Today, it is adding 60,000 jobs per month. That's not enough new jobs to lower the unemployment rate (because of new workers entering the work force), but it's enough to hold the rate steady — a remarkable achievement, given where we were. Meanwhile, the nonpartisan Congressional Budget Office estimates that between 1.2 million and 2.8 million people now have jobs thanks solely to ARRA and that the unemployment rate would be two percentage points higher (closer to 11 percent than 9 percent) without the stimulus package.

Add in TARP, and estimates of the success of the federal government's response are even more impressive. (Remember, TARP was a Bush policy; we are not engaged in Republican bashing here.)

The most thorough, objective, and fact-based analysis of the effects of TARP and ARRA on the economy was published in July 2010 by Alan S. Blinder, a Princeton economist and Wall Street Journal columnist, and Mark Zandi, chief economist at Moody's Analytics. Blinder and Zandi are hardly flaming liberals. Their analysis, titled "How the Great Recession Was Brought to an End," received little media attention when it was released. It is available online. Anyone interested in the facts should check it out.

Binder and Zandi's analysis concludes that without TARP and ARRA, the gross domestic product (GDP, a key measure of the economy's health) would have fallen 7.4 percent in 2009 and 3.7 percent in 2010, and the unemployment rate would have ultimately reached 16.5 percent. Instead, thanks to TARP and the stimulus package, GDP fell only 2.4 percent in 2009, is expanding about 2.9 percent in 2010, and is projected to expand 3.6 percent in 2011. According to Binder and Zandi, Bush's TARP and Obama's stimulus package, together, saved or created more than 10 million jobs and added $1.8 trillion to the economy.

As for the federal deficit? Binder and Zandi estimate that without TARP and ARRA, a still-crippled economy and anemic tax revenues would have resulted in a deficit that is nearly double what it is today and what it is expected to be in the next several years.

Bottom line: TARP and the stimulus package by themselves created millions of jobs, revived the economy, and kept the deficit from being much worse than it is.

Statistics aside, consider, too, that TARP arguably saved the U.S. auto industry (and perhaps the banking industry, as well), and ARRA kept food on the table for millions of the struggling and unemployed.

If you still don't think TARP and the stimulus were successful, well, Wall Street does. Before the stimulus package took effect, the Dow Jones Industrial Average was around 6,600. Today it is around 10,800. If you own stocks, are enrolled in a pension plan, or maintain a 401(k), your investment future is about 64 percent brighter today than before — thanks in large part to TARP and the stimulus package. With inflation (the most regressive of "taxes") still low, millions of Americans today are better off — much better off — thanks to the federal government's two-pronged "stimulus" — one part generated by a Republican president, one part by a Democratic president.

Failure? Hardly. Indeed, the federal "stimulus" can, and should, be called a huge bipartisan success.

Ed Weathers is a former editor of Memphis magazine. He writes and teaches in Blacksburg, Virginia

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