How the stimulus rescued America

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Nearly a year ago, Congress took a decisive step to shore up an economy in free fall by passing the $787 billion stimulus bill. Since then, we have seen millions of Americans enter the ranks of the unemployed, billions of dollars spent on economic recovery, and quarterly growth swinging from the largest decline in a generation to positive territory in the same year.

Cut through all the numbers, though, and this is what you find: The American Recovery and Reinvestment Act saved us from plunging into a second Great Depression.

That's tough to fathom for many Pennsylvanians who are out of work or have lost their homes in the wake of the worst recession since the Depression. But on this first anniversary of the recovery act, let's take a look at a few of the legislation's achievements:

84,000 additional Pennsylvania jobs: Wall Street's excesses have robbed Pennsylvania of more than 200,000 jobs since the recession began two years ago. By contrast, the stimulus kept tens of thousands of Pennsylvanians - our neighbors, friends, and relatives - employed.

189,000 Pennsylvanians kept out of poverty: This is a major success by any measure. Extended unemployment benefits, tax credits for struggling families, and enhanced food-stamp benefits, among other provisions, kept those Pennsylvanians hit hardest by the recession from falling into poverty last year.

$80 billion to U.S. consumers in the third quarter of 2009 alone: Is it any wonder that the economy started growing again when this money began making its way to Main Street?

I could give you more numbers, but you get the picture: The Recovery Act brought the economy back from the brink.

And these figures probably underestimate its impact, because they don't take market psychology into account. When the legislation passed, the economy was plunging at a pace similar to that of the 1930s. If Congress had sat on its hands, unemployment now could easily be 12 percent to 15 percent - and on its way to 20 percent.

That being said, the work is not done. Thousands of Pennsylvanians are still unemployed, and we face a jobs crisis of mammoth proportions.

And yet that all-too-familiar pre-crisis paralysis has reemerged in Washington. No longer faced with the potential collapse of the economy, politicians have lost the will to aid working families.

Our leaders need to muster the courage to act decisively again. Since private businesses and consumers aren't quite ready to drive our economic engine without a strong assist from government, we need a "Main Street Jobs Act" in Washington as well as in Harrisburg.

At the state level, Pennsylvania could tap into more than $600 million in additional federal funds for unemployment benefits, assistance for low-income families, and postsecondary-education grants for part-time workers. What are we waiting for?

At both the state and national level, policymakers should mobilize more private investment in conservation and renewable energy. The green economy is the future, and Pennsylvania is ahead of many other states. Policies are already in place to mobilize $7 billion in private investment for green projects in Pennsylvania over the next three years, which is one reason our economy is doing better than other states'. Now we need to build on that progress.

We also need state and federal policies that lift the incomes of middle-class families - such as a higher minimum wage and requirements that publicly funded green jobs pay decently. Remember: Flagging family incomes, combined with consumption financed by unsustainable borrowing - including loans against inflated home values - helped get us in this mess. Restoring middle-class income growth will pull us out - and keep us out by sustaining private consumption and investment for the long term.

With the enactment of the American Recovery and Reinvestment Act a year ago, Congress took the first major step toward bringing the economy back from the brink. And it worked.

Now we need our leaders to take additional steps to assure that the economy delivers for regular Pennsylvanians and Americans. Otherwise, unemployment will remain high for years to come.


Stephen Herzenberg is an economist and the executive director of the Keystone Research Center in Harrisburg. For more information, see www.keystoneresearch.org.

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