By Jonathan Nicholson
It certainly looks like a stimulus, acts like stimulus. So why the reluctance to call the government’s $2 trillion response to the coronavirus a stimulus package?
Sen. Ted Cruz (R-Texas) went out of his way to avoid the word.
“I refer to it as a relief bill and those are very different things,” Cruz said in a recent CNBC interview.
Cruz said the checks going to households were meant “to put real money in their pockets, not in a Keynesian stimulus approach, but simply emergency relief for a lot of people who are hurting.”
Cruz is by no means alone. So what’s going on?
The debate over how to shorthand the third coronavirus response package signed into law March 27 has political implications. And this is an election year.
In 2008 and 2009, legislative efforts to combat the financial crisis and the recession that followed were both called stimulus packages.
From a size perspective, the 2008 and 2009 packages were far smaller than this year’s $2 trillion-plus package.
The 2009 stimulus was projected to cost $787 billion through 2019. Its predecessor, literally named the Economic Stimulus Act of 2008, had a $124 billion, 11-year price tag.
Republicans often railed against these programs, and had some success in painting them as wasteful spending that was ineffective in stimulating the economy. The House flipped to the GOP in 2010, as Republicans made “where are the jobs?” a mantra in dismissing the effectiveness of the stimulus.
This damaged the word “stimulus” as a brand. And in an election year, branding can matter. Stimulus became a term of derision.
Doug Holtz-Eakin, president of the conservative American Action Forum and a former director of the Congressional Budget Office, said there is a political element to the worry over the stimulus tag. “I think that’s probably fair,” he said.
Some economists say there are more legitimate reasons than political concerns not to use the term stimulus. While the $2 trillion-plus package signed into law in late March has many of the same tools used in prior packages, they say its underlying aims make that label less accurate than for previous economic stimulus packages.
“I think of it as basically economic life support ‘til we get past the pandemic,” Holtz-Eakin said.
While “stimulus” has generally been attached to efforts to boost economic activity through tax or spending changes, Holtz-Eakin said it’s used by economists more precisely to mean attempts to spur overall demand for goods and services in an economy, either by getting households to spend more or increased governmental outlays.
St. Louis Fed President James Bullard said the object of the legislation is to keep people whole, not stimulate the economy that has been shut down on purpose.
“The object is to keep everybody whole during the period when you’re asking people to not go to their jobs or not to go to the shops and basically not participate in the economy,” he said, on CBS News’s “Face the Nation.”
And the original champion of stimulus was British economist John Maynard Keynes, whose theories, while holding sway for most widely respected economists, have been kryptonite for many conservatives like Cruz because Keynes viewed government spending as a good way to help the economy.
Scott Mulhauser, communications director for Senate Finance Committee Democrats when the 2009 stimulus was put together and now a partner in PR firm Bully Pulpit Interactive, said it was time to move on.
“While many of those who assailed stimulus efforts for workers, projects and families post-financial crisis now want that same funding, families are suffering, unemployment is rising and companies are shuttering, so let’s stop worrying about labeling and instead get this relief to those who need it,” he said.
U.S. equity benchmarks were sharply higher on Tuesday for the second straight day. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.58% was up over 250 points in midafternoon trading.