PRESIDENT OBAMA SAYS: The stimulus is the first step toward economic recovery.

“As soon as I took office, I asked this Congress to send me a recovery plan by President’s Day that would put people back to work and put money in their pockets.  Not because I believe in bigger government – I don’t.  Not because I’m not mindful of the massive debt we’ve inherited – I am.  I called for action because the failure to do so would have cost more jobs and caused more hardships.  In fact, a failure to act would have worsened our long-term deficit by assuring weak economic growth for years.”  

DMI SAYS:  “The economic stimulus package signed into law by President Obama is critical to restoring the economic stability middle-class Americans rely on. The stimulus will create jobs, prevent cuts to state services, and reinvest in infrastructure while providing a lifeline to the unemployed and to the uninsured. Contrary to its critics, the bill’s cost will be substantially outweighed by the economic and social benefits of reigniting growth. Yet the stimulus package will not be enough to pull the country out of the current recession. Preventing further job loss will require additional public investments like those the President has outlined in the areas of health care, education, and alternative energy.” 

• Middle-class Americans struggled to get ahead even before the official beginning of the recession in December 2007, but now the accelerating pace of layoffs has made matters far worse. 11.6 million people are currently unemployed and the unemployment rate has risen 2.7% in the last year. As the unemployment rate increases, the number of uninsured also rises: an average 7% unemployment rate in 2009 could mean 2.6 million more uninsured Americans. Hard-pressed state governments exacerbate the crisis with cuts to education and health spending – both decimating economic activity and jobs and reducing services for those more in need than ever.  According to the Center on Budget and Policy Priorities, 46 states face budget shortfalls and more than 20 have implemented or are considering cuts to health insurance and education programs.
  
  
• The economic stimulus package passed by Congress and signed into law by President Obama takes vital steps to address the crisis with $787 billion in new spending and tax cuts designed to preserve and create jobs, assist the unemployed and uninsured, and provide state budget relief, while making investments in infrastructure, education, science, health, and energy efficiency.  The legislation includes $40 billion for extended unemployment benefits; $54 billion to prevent cuts in state education services and additional funds for disadvantaged students; $87 billion to help states pay for Medicaid services; and $27.5 billion for highway repair and construction along with money for other infrastructure projects.
  
  
• The stimulus package will protect the most vulnerable households, while making important investments in infrastructure and education that will boost the economy and set the stage for longer term recovery.  Economists estimate that the stimulus will save around 3 or 4 million jobs by 2010.  At the same time, the safety net for unemployed workers and households in danger of losing health benefits to state budget cuts will stimulate the economy by putting money into the hands of the Americans most likely to spend it.  Extended unemployment insurance generates an estimated $1.63 in economic activity for every dollar spent, while aid to state governments generates $1.38.  Several targeted tax cuts will keep millions of Americans out of poverty.
  
  
• Conservatives have criticized the increased national debt that will result from the stimulus package as “generational theft.”  Though the national debt will increase because of the stimulus, it will remain at historically manageable levels. Further, the short-term economic activity generated by the spending will prevent a prolonged period of decline that would leave future generations worse off than the debt it creates.  By stimulating demand and, in turn, economic expansion, the stimulus legislation will ensure that future generations benefit from the economic growth that drives prosperity.
  
  
• By itself, the stimulus package signed into law by President Obama is insufficient to generate the jobs necessary to pull the country out of the current recession. Economists estimate that the law will reduce unemployment by about 2% by 2010, compared to the 9.2% unemployment the Congressional Budget Office forecasts for that year if no stimulus was passed. Yet this still leaves millions of Americans out of a job. To avoid additional economic pain for current and aspiring middle-class households, Congress and the President must make substantial public investments in health care and foreclosure prevention, and should consider further increases of unemployment benefits, more federal aid for state governments and additional infrastructure spending to promote growth and help to put people back to work.
  
  
• No matter how effective, the stimulus package will not lead to immediate, nor complete, economic recovery.  Tax cuts and extended unemployment insurance will act quickly, but other spending measures, like infrastructure spending, will take more time to have a noticeable impact.  Further, measures to address the housing and foreclosure crises are, as the President recognizes, equally important elements of economic revitalization.  Still, in the short term, the recovery package targets relief to struggling households and will provide a necessary economic jolt to keep Americans in work and health and education services available.

Relevant Statistics 

• Number of jobs lost since the official beginning of the recession in December 2007: 3.6 million
  
  
• Unemployment rate in early 2010 without the stimulus package, according to the Congressional Budget Office: 9.2%
  
  
• Reduction in unemployment rate in 2010 if the American Recovery and Reinvestment Act is enacted, according to the Congressional Budget Office, Mark Zandi of Moody’s Economy.com, and White House economic advisers, respectively: 1.9%, 2.1%, 1.8%
  
  
• Increase in uninsured Americans and in Americans enrolled in Medicaid and SCHIP, respectively, if unemployment averages 7% in 2009: 2.6 million and 2.4 million
  
  
• Unemployment rate in January 2009: 7.6%
  
  
• Increase in GDP from spending $1 on extended unemployment insurance benefits, in dollars: 1.63
  
  
• Increase in GDP from spending $1 on aid to state government, in dollars: $1.38
  
  
• Number of Americans kept out of poverty by the Making Work Pay, Child, and Earned Income tax credits included in the American Recovery and Reinvestment Act: 2.3 million
  
  
• Increase in the number of students eligible for a higher education tax break from the American Opportunity tax credit included in the American Recovery and Reinvestment Act: 3.8 million
  
  
• Percentage of spending and tax cuts included in the American Recovery and Reinvestment Act that will take effect by the end of 2010, according to the Congressional Budget Office: 74
   

Go to the next section: Financial Crisis

DMI on the 2009 Presidential Address to Congress