By Jason Scott Smith, Department of History, University of New Mexico
Economic stimulus has become controversial. The American Recovery and Reinvestment Act (ARRA), passed by Congress in 2009 and signed into law by President Barack Obama, put public investment back on the policy agenda. ARRA was, as Obama put it, “the most sweeping economic recovery package in our history…[one] that will bring real and lasting change for generations to come.” A number of politicians and experts agreed with Obama. For example, California Governor Arnold Schwarzenegger, drawing on the historical example of Franklin Roosevelt’s New Deal, said, “This is the most perfect time…to lay out a plan to rebuild America, just like Roosevelt has done because it would stimulate the economy and it would stimulate a tremendous amount of jobs.” Economist Mark Zandi, an adviser to John McCain’s 2008 presidential campaign, testified before Congress that public works investment delivers $1.59 of revenue for every dollar spent, versus $1.22 for every dollar of tax cuts. “The boost to GDP from every dollar spent on public infrastructure is large,” stated Zandi, “and there is little doubt that the nation has underinvested in infrastructure for some time, to the increasing detriment of the nation’s long-term growth prospects.”
Others, however, have disputed the very notion that government spending could create jobs or stimulate the economy. Economist Thomas DiLorenzo, writing for the Cato Institute, asserts, “Despite the rhetoric of ‘government job creation,’ economic logic denies the possibility that jobs can, on net, be created by government.” Ronald Utt, a senior research fellow at the Heritage Foundation, concurs. “We have no evidence from recent or distant history,” Utt claimed, that public works programs could generate employment or underwrite economic growth.
Despite Utt’s claims, history in fact is replete with evidence from the Great Depression that public investment in infrastructure did indeed generate employment and stimulate economic growth.
