Snap Fact #276 -The Obama Recovery Act Was a Job Creating Machine! Part 1 of 5

One good example is the mythology that has been created about the 2009 Obama Recovery Act *(See below). One year after the President signed the Recovery Act, the percentage of the public that believed it had created jobs was lower than the percentage that believed Elvis was alive. But at its peak, the Recovery Act directly employed more than 700,000 Americans on construction projects, research grants and other contracts. 

But the Act was much better yet. Add to the almost three quarters of a million directly created positions the jobs saved or created through the Bill’s unemployment benefits, food stamps and other aid to struggling families who are most likely to spend all receipts rather than save or invest any of the precious few dollars that come into a poor household. Add to that the fiscal relief for cash-strapped state governments; plus the tax cuts for more than 95% of all American workers. In the final analysis most respected independent economists estimate that the stimulus produced about 3 million jobs and added between 2.1 percent and 3.8 percent to our Gross Domestic Product.

The Stimulus didn’t hold unemployment below 8%, as the Obama team optimistically predicted. Unemployment soared past 8% before the stimulus even kicked into gear. It later became clear that the economy was free-falling much faster than the President or the experts realized at the time. But the bill helped stop that free fall. Job losses peaked the month before it passed. The jobs numbers that spring, while grim, marked the biggest quarterly improvement in almost 30 years. The Recovery Act launched a weak recovery, but even a weak recovery beats the almost certain depression that would have befallen the U.S. if President Obama had not stepped in with speedy action.

The nonpartisan Congressional Budget Office estimates that the parts of the program that got the most criticism -- actual spending on projects and aid packages -- were the most effective initiatives in creating jobs. Tax cuts for middle income workers were less effective, while tax cuts for the wealthy were deemed the least effective. 

In spite of the shortfalls, the CBO estimates that at least 1.4 million jobs were created and saved by the direct spending alone, and that as many as 3.6 million jobs were produced while stimulus funds were being spent. Stimulus is no longer playing a major role, but it was never intended to be the source of long-term growth. It was supposed to temporarily fill the hole that the previous administration had created until the private sector stepped in to fill its traditional role of private sector job creation.