What the Stimulus Did

President Obama signed the $26 billion state aid bill yesterday, in what could be the last stimulus act passed by this Congress.

It's worth thinking about these stimulus bills together. First, we had the original, mammoth $860 billion Recovery Act. That divided into three roughly equal categories: tax cuts, state entitlement help, and contracts and loans. In the following months, Congress passed occasional bills to extend and replenish up to 99 weeks of unemployment benefits. This year, they passed the HIRE Act to exempt employers from paying payroll taxes on new hires. Unemployment benefits were renewed once again, into the headwind of deficit concerns. And now we've passed another extender of sorts -- this time for cash-strapped states rather than cash-strapped families.

The cumulative effect of these bills breaks the one trillion dollar mark, even if we haven't spent it all (more than $200 billion of the Recovery Act has not been spent, with most of that money in the contracts and loans bucket). Many conservatives have called the stimulus a needless expansion of government. While it's clear that the federal government has extended its belt, it's not clear that this piecemeal stimulus represents a true expansion of the role of government.

The federal government never directly hired workers in the recession, if you discount the temporary Census takers we would have paid anyway. It didn't create a raft of alphabet programs to juice demand. Instead, the administration spent hundreds of billions of dollars plugging leaks: leaks in families' wallets when the breadwinner lost a job; leaks in state budgets when revenue plunged. We paid hundreds of billions of dollars to protect the status quo.

In a recession, this was defensible. In the long run, the status quo is killing us. State budgets will have to slim, rather than be fed by stimulus. Your taxes will have to go up, rather than be eternally rebated. Federal medical programs will have to be reformed rather than shouldered by the federal government. We will have to create jobs, rather than pay the jobless to remain so. The stimulus was about keeping things the same. That was necessary. The next few years are about changing the way we pay for the programs we enjoy. That will be necessary, too.

That's my piece. Here's your Business Breakfast

Obama Signs State Aid Law: $26 billion will go to pay for health care and education [WaPo]


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