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Globe and Mail columnist Doug Saunders. RANDY QUAN FOR THE GlOBE AND MAIL (Randy Quan/Randy Quan/THE GLOBE AND MAIL)
Globe and Mail columnist Doug Saunders. RANDY QUAN FOR THE GlOBE AND MAIL (Randy Quan/Randy Quan/THE GLOBE AND MAIL)

DOUG SAUNDERS

Stimulus may be a dirty word, but it stopped the slide Add to ...

I gripped the steering wheel with both hands and struggled as my car banged across the deep ruts and fissured pavements of one of America’s worst state highway systems, only to be pushed out of my lane by the one of those 1960s school buses that continue to serve one of America’s worst school systems.

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This was the California I’ve long known. The wealthiest state is a tax-starved infrastructural and human disaster, one of the worst victims of the country’s four years of economic decline.

Then, as I passed through the San Gabriel Mountains, the scene changed. The highway became smooth and well-designed. Crews of workers were building new overpasses and safety rails. The one-storey buildings along the road were encrusted with solar panels, and schools were being built or refurbished. Later, as I entered the Central Valley, a sign reminded me that this drive would soon become unnecessary. In a few years, after six train-free decades, it’ll be possible to go from Los Angeles to San Francisco in 21/2 hours, bringing Americans the sort of sleek high-speed rail line that joins Barcelona and Madrid, Beijing and Shanghai, and London and Paris.

Here, all around me, was Barack Obama’s much-derided stimulus plan. The American Recovery and Reinvestment Act dumped more than $800-billion into the U.S. economy through emergency public spending, tax cuts and incentives, in an effort to jolt the economy out of its post-2008 anomie.

The result was one of the largest government expenditures in history: As writer Michael Grabell notes in his tough analysis of the plan, it has cost more than the New Deal, the Marshall Plan, the interstate highway system, the space program, the Iraq war or the Louisiana Purchase. Its roads, subways, schools, electric-car factories and courthouses have transformed the landscape.

Despite its cost and its huge ambitions – or perhaps because of them – the Recovery Act isn’t mentioned much in Mr. Obama’s re-election campaign. The word “stimulus” has become poison. Americans associate it with public debt, an economy that failed to start growing and a string of embarrassing failures of the sort that only government money can deliver.

In Fremont, I saw the sprawling buildings that housed Solyndra, a solar-panel manufacturer that received $500-million from the stimulus plan, only to chew through the money and go bankrupt last year, plunging 1,100 workers into unemployment. That, to many Americans, is the face of stimulus.

The problem was not its cost. Economists say that, if Mr. Obama had wanted to jump-start the economy the way Franklin Roosevelt did in the 1930s, he would have needed to spend more. While the Recovery Act accounted for 25 per cent of America’s $3-trillion in annual public spending – and two-thirds of it was tax cuts and incentives rather than direct spending – the two major programs at the heart of the 1930s New Deal cost the equivalent of almost four years of government spending. “So while the New Deal probably felt like going from zero to sixty miles per hour,” Mr. Grabell says in his book Money Well Spent? The Truth Behind the Trillion-Dollar Stimulus, “the Recovery Act was more like going from thirty-five to fifty.”

That said, the Recovery Act did save between two million and three million jobs – and thus prevented the lethal spiral of unemployment, debt, foreclosure and neighbourhood and educational failure that would follow. While it didn’t achieve Mr. Obama’s goal of bringing unemployment down to 8 per cent, it did keep it down to 9 per cent; private forecasting firms say that, without it, unemployment would have peaked at 12 per cent.

It’s the reason the U.S. didn’t suffer a European-style debacle. Mass homelessness hasn’t been a feature of this depression. As Michael Grunwald notes in his book The New New Deal, “there was no epidemic of foreclosed families on the streets, no Obama-era version of the Hooverville tent cities. The number of Americans without shelter actually declined 1 per cent from 2009 to 2011.” That was a direct product of the stimulus plan, which included an effective anti-homelessness program.

For once, the U.S. got bold, acted fast and invested in the long-term sustainability of its economy. The risk now is not that there’ll be more risky spending, but that a myopic Congress will raise taxes, cut spending and kill the recovery. That would put an end to those smooth roads, and not just in California.

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