This is what people who lose a political argument always say: We didn't get our message out. But in this case it's true. The demand-side spending argument was part of the stimulus sales pitch, but not the biggest part. When House Republicans unanimously voted against it, Democrats attacked them for their crime against "bipartisanship," and for opposing the tax cuts that made up about $280 billion of the package. Those tax cuts allowed Obama to fulfill a campaign pledge to give "a tax cut to 95 percent of Americans." The spending was more stimulative than the tax cut. The White House just didn't convince people of that.
So Keynesians started the stimulus debate in a hole, and it got deeper as watchdogs and Republicans looked for waste, frivolity, or anything that sounded like waste or frivolity. It didn't really work. When Obey uses the 95-percent-of-what-we-did-was-good line, he's hinting at how the worst-sounding stimulus projects defined the enterprise.
"Our Waterloo on this was the quote-unquote 'non-existent congressional district' problem," said Ron Klain, the former chief of staff to Joe Biden, who helped manage the effort to spot dumb-looking spending. A few hundred of the first reports on how money was being spent—a few hundred of about 90,000—misreported the details, showing spending in congressional districts that did not exist. The projects were real, the jobs were real, but there is no 57th district in Minnesota or 22nd in New Mexico. Someone had put the wrong number on a form. Still, those fictitious districts were the story. "We had a week of stories taking us apart on TheColbert Report and what not," sighed Klain.
The end result of stories like that has been a virtual collapse in the belief that government spending can spur economic growth. This week, which ended with a jobs report that points in big, flashing arrows to more recession, will change nobody's mind about the need for spending cuts. When I asked Sen. John McCain whether spending cuts should be approached with caution about the impact they'd have on employment, he rejected the premise.
"The people I rely on say that spending cuts are vital to the future of our country," he said, "because we don't want to emulate Greece. If we emulate Greece, then we have huge unemployment."
But was it a problem that the stimulus money was running out?
"We just learned, apparently, that the stimulus package was only $278,000 per job," said McCain. "We certainly can't keep that up."