There’s a line in the movie Dave in which a guy impersonating the president, looking for ways to cut the budget, asks his commerce secretary, “So, we’re spending $47 million so that somebody can feel better about a car that they have already bought?” It doesn’t cost $47 million to get Joe Biden to give a speech — he’ll talk anywhere, anytime, at great length, for free — and his address to the Brookings Institution on Thursday was intended to prevent buyer’s remorse. America already has bought the $787 billion stimulus package and will be paying off that bill for a very long time. Was it a good buy? Two hundred days later, unemployment still is creeping upward, almost at 10 percent, and the public is starting to wonder why it is getting so little bang for its buck. President Obama, just returned from Martha’s Vineyard, dispatched Biden to make Americans feel better.
But in making his case for the stimulus, Biden — exaggerated. Just a little. First, he offered a revisionist history of the financial crisis and the administration’s response to it. Biden said that when Obama took office, the economy was “on the verge of failure. Credit was frozen. Businesses couldn’t borrow for inventory, much less expand or hire.” Not really. By January, the worst of the crisis had passed. Problems remained, but the credit markets had mostly thawed, aided by unprecedented interventions from the Treasury and the Fed to guarantee interbank lending.
Biden also exaggerated when he said, “We took the very unpopular, but necessary, step of rescuing the banks.” Actually, the Bush administration did that. The Obama administration’s only notable contribution to the constellation of bank bailouts was the Public-Private Investment Program, a dimly burning star that tanked with investors when it was unveiled and hasn’t really been heard from since.
“And now,” Biden added, “although there’s a long way to go, eight out of ten of the largest financial institutions in America . . . have repaid the government in full, and, I might add, at a $4 billion profit for the taxpayers.” As Biden failed to mention, that $4 billion profit is dwarfed by the hundreds of billions in debt and dubious equity the taxpayers still have tied up in failed companies like AIG, Citigroup, and Fannie and Freddie, much of which is unlikely ever to be profitably resolved. A long way to go, indeed.
Biden said that the administration “took action in stabilizing the housing market, allowing responsible homeowners to stay in their homes. And we’re beginning to see the results of that.” But the administration’s efforts have not had much of an effect on foreclosures, primarily because the slice of borrowers who are good loan-modification risks is relatively small. Most borrowers who fall behind in their payments either catch up eventually without help or can’t catch up no matter what.
That’s four big exaggerations or omissions, and we haven’t even gotten to the stimulus yet. Biden kicked off this portion of the speech with a silly metaphor. Critics of the stimulus, he said, call it “a grab-bag of too many different programs. But the fact is . . . the Recovery Act is not a single silver bullet. I think of it as silver buckshot, as opposed to a single bullet.” This is an illuminating analogy. Think of the stimulus as scattering the nation’s silver instead of hitting targets with precise shots.
According to its starry-eyed backers, the stimulus was supposed to fund hundreds of infrastructure projects, create thousands of “green-collar jobs,” put millions back to work — fast. But the money for such projects has slowed to a trickle. Instead, the bulk of the stimulus has gone to pay for tax rebates, income redistribution, and bailouts for fiscally incontinent state governments, all of which Biden ignored in his speech.
On tax rebates: “My Republican friends — as my mother would say, God love them — forget that they insisted on $288 billion in tax cuts.” Wrong. The tax rebates in the stimulus were included to fulfill Obama’s campaign pledge that 95 percent of Americans would receive a tax cut. It’s strange that his administration would “blame” the Republicans for insisting on tax rebates that Obama now wants to extend. If it had been up to conservatives, the tax cuts would have taken the form of rate reductions, not rebates.
On income transfers such as extensions of unemployment benefits, food stamps, and Medicaid: “I know my Republican critics think maybe we shouldn’t do that. Maybe that’s the difference between being a Democrat and a Republican. . . . I believe this was the right thing to do morally.” Putting aside the question of whether these programs are morally virtuous, Republicans opposed these provisions of the stimulus bill because they all but locked states into making “temporary” extensions of these programs permanent, inflicting enormous expenses down the line. This is why some governors, such as Rick Perry of Texas, said thanks, but no.
On state bailouts: “Ask the governors, Republican and Democrat. Without the billions of dollars in Recovery Act stabilization funds coming in, could they have maintained essential services in their states?” That is mostly true of Republicans named Arnold Schwarzenegger and of Democrats in blue states that have redefined “essential services” to include six-figure annual pensions for state employees and health insurance for “children” up to the age of 25.
As far as infrastructure spending is concerned, Biden talked a good game. But a brutal fact-check issued hours after the speech by the Associated Press noted a number of exaggerations and omissions in this part of his speech, too. Biden neglected to mention the dramatic slowdown in highway spending, numerous complaints of waste because of a lack of competitive bidding, and more than $1 billion spent to “repair” bridges that passed recent inspections with high marks.
“If you look at the Recovery Act as a two-year marathon,” Biden said, “we’re at the nine-mile mark. . . . Two hundred days in, the Recovery Act is doing more, faster and more efficiently and more effectively than most people expected.” To the contrary: There are plenty of reasons to think that the stimulus has been as inefficient and ineffective as its critics feared it would be — unemployment is getting worse rather than improving as predicted, countries that spent less on stimulus (and those that employed tax-rate reductions), are recovering more quickly, etc. — and Biden’s exaggerations only served to highlight these reasons.
We don’t feel better. Do you?