You're Wrong, Eric Cantor: The Stimulus Is Working

It's surprising that it took a full 69 minutes from the moment the Bureau of Labor Statistics July jobs report was released for the condemnatory news release from House Republican Whip Eric Cantor to reach my inbox. No doubt it was written hours of even days before, the message being so predictable—and wrong.

“The Administration promised the American people that their stimulus bill would jolt the economy, keep unemployment under 8.5 percent, and create permanent jobs. The stimulus achieved none of those promises," the news release quoted Cantor as saying. "For Americans, the test for stimulus success is whether or not they have a job. Today, for another 247,000 Americans and their families, the stimulus failed that test.”

No, it didn't. Many mainstream economists see in today's jobs report vindication of President Obama's stimulus strategy. In fact, EPI economist Heidi Shierholz told me in an interview today [1] that, if anything, the jobs report shows that Congress was wrong to bend to conservative pressure to limit the stimulus.

"We would have likely seen losses that were roughly double what we actually saw" without the American Recovery and Reinvestment Act, Shierholz said.

Even without knowing that today's jobs report would yield better-than-expected numbers—there had been some thought that the unemployment rate announced today would breach 10 percent rather than go down modestly to 9.4 percent—economists quoted in today's New York Times [2] were amplifying the case we have been making for months for the need for increased government investment.

“The signs of the stimulus are there,” said Allen L. Sinai, chief economist at Decision Economics, a forecasting firm in New York. “Government — federal, state and local — is helping take the economy from recession to recovery. I think it’s the primary contributor."

Christina Romer, the head of the Council of Economic Advisers, explained in a speech before the Economic Club of Washington that "an economy that was in free fall has stabilized substantially, and now looks as though it could begin to recover in the second half of the year." She also offered this analogy to rebut people who assert that the stimulus has failed because the economy's deep downward spiral did not immediately reverse:

"Do you decide that the medicine is useless? Do you conclude that the antibiotic caused the infection to get worse? Surely not. You probably conclude that the illness was more serious than you and the doctor thought and are very glad you saw the doctor and started taking the medicine when you did."

In a news conference afterward, she extended the analogy: "One of the rules of an antibiotic is don't stop it before you finish taking the whole course."

Conservatives in Congress have actually argued for ending the stimulus spending early, which would be the most counterproductive of actions: It would not only mean that the jobs that would otherwise be created or saved would not be there, but that would snuff out the economic growth that would bring down the deficit that conservatives say they're concerned about.

Job One for Congress is keeping the pump primed for economic growth, and that is a fight that must be waged on multiple fronts. The number of long-term unemployed workers—those out of work for 27 weeks or more—has reached a record-high 5 million, and one of the first tasks Congress should take up when it returns from its recess is an extension of long-term unemployment benefits. Yes, there will be conservative demagoguery over more government borrowing to finance it. But when the alternative is more home foreclosures, more bankruptcies and more widespread economic pain, it is clear which choice is not only the most humane but also makes the most economic sense.

Meanwhile, Congress must stay laser-focused on what sets up the economy for sustainable, long-term prosperity. That's one more reason the fight matters to keep health care reform from being simply a watered-down tinkering with the status quo. It also matters that progressives continue to build the economic, political and moral case for government investment and engagement in a new economic strategy that will not repeat the "jobless recovery" of the conservative era.

PODCAST

Economic Policy Institute economist Heidi Shierholz puts the July unemployment report in context.