By Christine Harbin Hanson
Five years ago today, President Obama signed the American Recovery and Reinvestment Act into law. Proponents claimed that injecting $787 billion of borrowed money into the economy would result in long-term job creation and economic growth. Five years later, the economy remains sluggish and the President’s wishful thinking has failed to become reality.
President Obama promised the American people that the stimulus package would make it easier to find jobs. His advisors incorrectly projected that the stimulus would prevent the unemployment rate from exceeding 8 percent. The unemployment rate reached 10 percent in October of 2009 and remained above 9 percent for the two years that followed.
Millions of Americans have given up the hope of finding a job and dropped out of the labor market entirely. The labor force participation rate has declined from 66 percent to 63 percent since 2009, the lowest it’s been in decades. Three million people have left the labor force due to the down economy since the start of the recession in late 2007, and only one out of three will return when the economy eventually recovers.
For the long-term unemployed, it’s even worse. Their unemployment rate is the highest it has been at any point between 1948 and 2008, at 2.6 percent. According to a report from the Congressional Budget Office, there are four million Americans who have been looking for work for 27 months or more, compared to 1.3 million before the recession. Long-term unemployment causes workers’ skills to decay, makes them less attractive to employers and decreases their lifetime earnings.
The stimulus failed because people know how to spend and invest their own earnings better than government officials do and much the money was spent carelessly. The Obama Administration squandered millions of taxpayer dollars on poorly vetted, wasteful projects with little to no oversight.
Unfortunately for taxpayers, the American Recovery and Reinvestment Act, which cost taxpayers $800 billion, was just one in a series of stimulus measures that have totaled $2.5 trillion since the recession began. Nor was the package passed in vacuum—it interacts with many other policies that also depress economic activity and job creation, such as the President’s health care law.
This anniversary should give lawmakers reason to pause and reflect on the economy as it continues to struggle to recover. Instead of repeating the mistakes of the past, they should control federal spending.