Tim Pawlenty is Right About the Stimulus. Kind Of.

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Minnesota Gov. Tim Pawlenty, widely considered a major contender for the 2012 Republican presidential nomination, said it would be "ludicrous" to claim that the stimulus is "what pivoted" the economy, according to Bloomberg. He's absolutely right! With barely 15 percent of the $787 billion bill spent, that would be a bold claim indeed. I'd like to know who's making it.


It's one thing to say that the stimulus is helping -- even Pawlenty's economic development director is saying that. It's quite another to argue that, out of more than $2 trillion spent on bailing out our financial system, auto system, states and so on, the key fulcrum was $81 billion of stimulus spending. Arguing that four percent of the administration's economic rescue plan didn't single-handedly "pivot" the economy is setting up a pretty flimsy strawman. It also doesn't obviate a stimulus package that will spend the most of its money in the next twelve to fifteen months.

The fact is, it's way to early to start talking about the stimulating effects of the stimulus, since much of the early money has gone to bolster state budgets. Early GAO reports of stimulus spending (see graph below) found most of the money going to Medicaid and plugging holes in state budgets. In other words, it gave states a crutch when their budgets were falling apart. Indeed, of the $1.7 billion spent or committed in Minnesota, according to Pro Publica, $1 billion has gone to bolstering Medicaid or the State Fiscal Stabilization Fund. If Pawlenty considers that wasteful, then he should say so specifically. Running against Medicaid and state fiscal aid might not be popular, but at least it would be intellectually honest for a stimulus critic.
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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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