Did the Stimulus Stimulate the Economy?

The Congressional Budget Office examines the impact of the federal stimulus on its fifth anniversary, and both overseas stocks and commodities see an uptick on Presidents' Day.

 By Dees Stribling, Contributing Writer

The fifth anniversary of the American Recovery and Reinvestment Act, popularly known as the federal stimulus of 2009, came over the holiday weekend, inspiring both informed and uninformed commentary. The stimulus package was estimated to cost about $787 billion at the time it was passed by Congress in February 2009, but that figure was later revised upward by more than $40 billion.

Studies of the impact of the stimulus have been done by the nonpartisan Congressional Budget Office. The most recent one was released about a year ago, when the agency concluded that most of the impact of the stimulus had already happened.

According to the most recent CBO report, which examined the impact of the stimulus during calendar year 2012, the measure raised real GDP growth for that year between 0.1 percent and 0.8 percent, and lowered the unemployment rate between 0.1 and 0.6 percentage points. It also increased the number of people employed between 200,000 and 1.1 million.

“Those ranges reflect the substantial uncertainty that surrounds the broad economic effects of such policies and a range of economists’ views about the magnitude of those effects,” the CBO noted, so the exact impact of the law will probably remain unclear. But — as predicted by Keynesian economic thinking — there seems to have been some net positive.

The White House, for its part, asserted that the “Recovery Act, by itself, saved or created about 6 million job-years, where a job-year is defined as one full-time job for one year. This translates to an average of 1.6 million jobs a year for four years through the end of 2012. This estimate is within the range of estimates provided by the Congressional Budget Office and other outside organizations.”

The CBO also estimated that the stimulus will increase federal budget deficit by about $830 billion over the years between 2009 and 2019. Close to half of that impact occurred in fiscal year 2010 (ending Sept. 30, 2010), and more than 90 percent of the law’s budgetary impact had already occurred by December 2012, so the matter is more of historic — and partisan — interest than an ongoing impact on the current budget deficit (which has been steadily shrinking as a percentage of GDP since the recession).

Overseas Stocks, Commodities Mostly Up

There was no trading on Wall Street on Monday for the holiday technically honoring George Washington’s birthday, though popularly associated with all presidents. Japan’s Nikkei 225 increased 0.6 percent on Monday as the yen appreciated against the dollar. European stocks, including Germany’s DAX and Frances’s CAC 40, were both up small amounts on Monday.

In the commodities markets on Monday, gold and silver held near their 2014 peaks, with gold trading at $1,328.30 per troy ounce and silver at coming in at $21.64. West Texas Intermediate crude oil rose 30 cents to $100.60 a barrel on Monday, while Brent North Sea crude oil dropped 12 cents to $108.96 a barrel.