Was the Obama Stimulus a Success or a Failure?

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Sept./Oct. 2012; Source: Foreign Policy

Articles debating the successes or failures of President Obama’s stimulus package should be of interest to NPQ Newswire readers, given that nonprofits were among the most important intermediaries for and deliverers of stimulus programs. In the upcoming issue of Foreign Policy, TIME Magazine’s Michael Grunwald suggests that the stimulus was “certainly a political failure,” but “there is voluminous evidence that the stimulus did provide real stimulus, helping to stop a terrifying free-fall, avert a second Depression, and end a brutal recession.” Grunwald’s long article addresses the pros and cons of the stimulus, some of which is presented below.


  • There were some “silly expenditures, like costumes for water-safety mascots…and fictitious expenditures, like levitating trains to Disneyland” and other examples of expenditures that might have qualified for the late Sen. William Proxmire’s regular “Golden Fleece” awards.
  • The jobless rate is still over eight percent, the longest run of unemployment over eight percent since the Depression.
  • “Some of Obama’s progressive critics…complain that he should have gotten more out of Congress once it became clear the initial jolt wouldn’t restore a vibrant economy…[Paul] Krugman, who had warned that inadequate stimulus would give stimulus a bad name, had been right.”


  • According to the Moody’s website Economy.com, JPMorgan Chase, and the Congressional Budget Office, the stimulus “increased GDP at least 2 percentage points, the difference between contraction and growth, and saved or created about 2.5 million jobs.”
  • “A Washington Post review of Recovery Act studies found six that showed a positive economic effect versus one useful study (by prominent Republican economist John B. Taylor) that concluded the stimulus failed—and critics noted that Taylor’s data just as easily support the conclusion that the stimulus was too small.”
  • The Recovery Act’s provision of extra food stamps, unemployment benefits, and other social safety net protections “made an extraordinarily painful time less painful, lifting at least 7 million Americans above the poverty line while making 32 million poor Americans less poor.”
  • “(T)he Recovery Act was the biggest, most transformative energy bill in history, financing unprecedented government investments in a smarter grid, cleaner coal, energy efficiency in every imaginable form, ‘green-collar’ job training, electric vehicles and the infrastructure to support them, advanced biofuels and the refineries to brew them, renewable power from the sun, the wind, and the heat below the earth, and factories to manufacture all that green stuff in the United States.”
  • “The stimulus was also the biggest and most transformative education reform bill since the Great Society, shaking up public schools with a ‘Race to the Top’ competition designed to reward innovation and punish mediocrity.”
  • “It was a big and transformative health-care bill, too, laying the foundation for Obama’s even bigger and more transformative reforms a year later; for example, it poured $27 billion into computerizing America’s pen-and-paper medical system, which should reduce redundant tests, dangerous drug interactions, and fatal errors by doctors with chicken-scratch handwriting.”
  • “It included America’s biggest foray into industrial policy since FDR, the biggest expansion of anti-poverty initiatives since LBJ, the biggest middle-class tax cut since Ronald Reagan, and the biggest infusion of research money ever. It sent $8 billion into a new high-speed passenger rail network, the biggest new transportation initiative since the interstate highways, and another $7 billion to expand the country’s existing high-speed Internet network to underserved communities, a modern twist on the New Deal’s rural electrification.”
  • “Experts had warned that 5 percent of the stimulus could be lost to fraud, but investigators have documented less than $10 million in losses—about 0.001 percent.”
  • The homelessness prevention provisions of the Recovery Act helped house 1.2 million Americans who might have significantly added to the nation’s homeless population otherwise.

PRO or CON (depending on your perspective)

  • The actual direct and tax expenditure of the stimulus was, at last count, $831 billion, which according to Grunwald was “larger than the entire New Deal in constant dollars.”
  • “[Solyndra is]… supposedly a case study in ineptitude, cronyism, and the failure of green industrial policy. Republicans investigated for a year, held more than a dozen hearings, and subpoenaed hundreds of thousands of documents, but they uncovered no evidence of wrongdoing….Solyndra was a start-up that failed. It happens.”

Where you stand on the stimulus is generally where you sit. Where do nonprofits sit regarding the success or failure of the stimulus, now that its spending is pretty much coming to a close? If your organization implemented programs with stimulus funding, tell us what you would add as PRO and CON points to the lists above.—Rick Cohen

  • Tom Tudor

    As an employee of one utility and on the board of three other utilities, all not-for-profit utilities serving rural areas, the stimulus is providing expansion of broadband to small rural communities for economic development, advancing smartgrid technology for power reliabiliy, and providing a co-generation project (methane gas to energy). These are overdue and great for Maryland’s rural communities. Obviously, there are some very bad examples of waste across the nation. It is a shame that an objective, non-political review can not be made. As the economic development opportunities grow in these rural Maryland because of these funded projects, it would be beneficial to measure the return on investment for these rural communities in the areas of taxes, unemployment, income per capita, business retention/business development, etc.

  • Keith Solomon

    In the 1930’s the great capitalist Jesse Jones ran the Reconstruction Finance Corporation. As lender of last resort who carefully reviewed the financials of all the projects financed by the RFC he considered a 20% failure rate to be acceptable. By that standard the Obama stimulus is more than successful.