Farewell, President Stimulus

By Matt Weidinger

Tuesday, December 31, 2024

 

When it comes to stimulus, President Joe Biden has carved out a signature spot in American history. From his role as “sheriff” overseeing Democrats’ massive 2009 stimulus law to signing an even bigger stimulus bill as president in 2021, Biden is more closely associated with partisan stimulus policy than any other politician. And the disastrous political consequences of his stimulus-law failures may prove to be Biden’s most enduring legacy.

 

In the aftermath of the 2008 election, as the severity of the Great Recession became more apparent, President Barack Obama and Vice President Biden worked with Democratic congressional leaders to craft what became the American Recovery and Reinvestment Act. Enacted just weeks into their new administration, the 2009 law directed a then-record $800 billion to an array of stimulus policies: large stimulus checks, increased unemployment and food stamp benefits, state aid, green-energy subsidies, and more. Obama dubbed Biden the “sheriff” overseeing the law’s implementation, crediting him with “seeing shovels hit the ground” just two weeks after its signing.

 

The marketing for the Obama-Biden stimulus law preceded its enactment. A report authored by the incoming administration’s senior economists predicted the still-draft legislation would keep unemployment under 8 percent while creating 3.7 million new jobs. Reality proved far different. After the law’s signing, unemployment soared to 10 percent, remaining well above the administration’s forecasts — with or without it. Employment fell to nearly 7 million positions short of administration predictions.

 

As job losses mounted, the Obama-Biden administration pivoted from suggesting the law would create millions of jobs to wanly suggesting it had instead saved millions of others from being lost. Few were convinced. On the law’s first anniversary, more Americans believed Elvis was alive (even though he died in 1977) than that the stimulus had created jobs. Obama eventually admitted “there’s no such thing as shovel-ready projects,” and jobs even evaporated during what Biden dubbed “recovery summer.”

 

The political consequences were severe. In the 2010 midterm elections, voters delivered what Obama dubbed a “shellacking,” with House Republicans gaining 63 seats and sweeping into the majority. Obama and Biden were subsequently reelected in 2012, but they had to negotiate with Republicans on phasing down stimulus benefits for the remainder of their administration.

 

Looking back on that experience, Democrats blame the slow recovery from the Great Recession on too little stimulus. Joe Biden built that lesson into his Covid response playbook. At nearly $1.9 trillion, Biden’s own stimulus law — the March 2021 American Rescue Plan — was roughly twice as large as Obama’s 2009 law. And within weeks of its signing, Biden promised trillions of dollars in additional benefit expansions and other spending as part of his massive Build Back Better agenda. There also would be no repeat of 2009’s missed administration job-creation promises: Those predictions were outsourced to private-sector allies.

 

But if failed job creation was the original sin of the 2009 stimulus, historic inflation fueled by excessive spending proved the undoing of the 2021 stimulus law. Former Obama treasury secretary Larry Summers warned that the legislation was too large and could “set off inflationary pressures of a kind we have not seen in a generation.” Obama “car czar” Steven Rattner seconded that warning about the “risk of igniting high inflation” and called for scaling back the legislation’s vast deficit spending. Both were ignored, with Biden and his allies later arguing that any inflation would prove transitory. When inflation reached 40-year highs, the administration admitted it had a problem by dubbing a second stimulus law the “Inflation Reduction Act.” But as with 2009’s “saved” jobs, voters were unpersuaded. Republicans reclaimed the House majority in 2022 and, with inflation still a top concern, voters reelected Donald Trump in a Republican sweep.

 

Since the election, Biden has been largely silent, except for a Rose Garden address in which he praised his “historic presidency.” Without mentioning stimulus laws by name, he touted “work we’ve done” that “is already being felt by the American people.” Naturally he made no mention of how, as Charles Cooke put it, “the Biden-Harris administration will be remembered for spending its way into the worst inflation in 40 years, and then pretending that it had done no such thing.”