Thank you, Chairman Jordan, Ranking Member Kucinich, and other members of the Subcommittee for the opportunity to appear before you this morning to discuss the stimulus bill enacted two years ago tomorrow. The two-year anniversary of the American Recovery and Reinvestment Act (ARRA) presents an appropriate time to evaluate the legislation's effectiveness. There are many metrics by which one could assess this massive federal policy, but in my testimony today, I will focus on just two: cost and "shovel-readiness."
While it is certainly clear that the stimulus bill failed to create a robust economy, I will not attempt to describe here any empirical simulations of the bill's impact (or lack thereof) on the economy. For better or worse, the ARRA was enacted because President Obama and Democratic majorities in the House and Senate believed that a large fiscal stimulus could make a positive contribution to the economy by stimulating aggregate demand. Under that premise, and the assumption that the stimulus bill spending was not completely offset by a decline in private activity, the effectiveness of the legislation depends, quite simply, on the stimulus spending occurring in a timely fashion. My testimony today will look at whether or not that happened.
As described in greater detail below, my conclusions include the following key points:
- The massive, poorly considered stimulus bill rushed through Congress was not designed to spend money quickly. While some activities such as one-time additional Social Security payments, extended unemployment benefits, and other aid occurred quickly, funding that involved actual projects or federal contracts were very slow to begin.
- In the seven months of fiscal year 2009 remaining after enactment of the ARRA, only 18 percent of the stimulus bill's spending occurred. Even now, over one-fourth of all stimulus monies remain unspent.
- A number of departments and agencies with large stimulus fund allocations appear particularly bad at getting money out the door, including the Departments of Energy, Transportation, Commerce, and Homeland Security and the GSA.
- The ARRA will continue to cost money beyond that estimated by the Congressional Budget Office (CBO) because many provisions are being extended or made permanent.
Alex Brill is a research fellow at AEI.