TRUTH AND FICTION ON THE STIMULUS BILL / THE NEW YORK TIMES EDITORIAL ( RECOMMENDED READING )

February 20, 2010

Editorial

Truth and Fiction on the Stimulus Bill

It was a pleasure to see President Obama come out swinging this week and win a round in the long-running fight with Republicans over the $787 billion stimulus bill.

On Wednesday, the first anniversary of the signing of the package into law, Mr. Obama and other administration officials detailed the success of the stimulus while Republicans kept trying to label it a failure. Democrats did not shy from pointing out that many Republicans who voted against the stimulus then lobbied to get some of the money for their districts.

(The Wall Street Journal assembled a particularly telling hall of shame by using the Freedom of Information Act to obtain letters written by more than a dozen Republican lawmakers to various government agencies, asking that stimulus money be awarded for job-creating projects in their districts.)

There is virtually no dispute among economists that the stimulus prevented a bad recession from becoming much worse. Among other things, it has preserved or created 1.6 million to 1.8 million jobs, according to various private sector analyses, and it is expected, ultimately, to add a total of roughly 2.5 million jobs.

But that hasn’t stopped Republicans — all but three of whom voted against the stimulus — from claiming that it failed to create “a single job.” They also have called it a waste and socialism, when it is basically Economics 101 for how government should act in a deep recession. They also blame the stimulus for the widening budget deficit. Wrong again. Today’s deficits are largely rooted in the profligate Bush years, with stimulus contributing little to the long-term shortfall because the spending is temporary.

The true test of Mr. Obama’s ability to combat misinformation and win public support for stimulus will come in the months ahead. With the economy still exceedingly fragile — as measured by high unemployment and economic growth projections that are well below historical recovery rates — more stimulus is needed to ensure that it does not backslide as last year’s stimulus fades.

The recent Obama budget calls for $266 billion in new spending for jobs and stimulus, including all-important extensions of unemployment benefits for the long-term jobless and fiscal aid to states that will otherwise face a punishing round of layoffs, canceled projects, spending cuts and tax increases this year and next. The budget also calls for a hiring tax credit that is more generous than the one recently proposed by the Senate, and for direct job creation.

The plan is timely, targeted and temporary — the pillars of a sound stimulus package. The Republicans will go on attacking it, and pretty much every other idea Mr. Obama has, and he will have to keep fighting back.

Copyright 2010 The New York Times Company