WEBVTT 00:00:00.000 --> 00:00:01.659 You know, usually when we talk about a medical 00:00:01.659 --> 00:00:05.299 diagnosis, there is this expectation of precision. 00:00:05.740 --> 00:00:07.919 Right, yeah, like it's binary. Exactly, it's 00:00:07.919 --> 00:00:10.560 like engineering. You break your arm, the x -ray 00:00:10.560 --> 00:00:12.900 shows that jagged white line, and the doctor 00:00:12.900 --> 00:00:15.119 just points and says, there it is. Broken or 00:00:15.119 --> 00:00:18.079 not broken, it's clean and honestly it's comforting. 00:00:18.600 --> 00:00:21.579 We like things to be visible and easily categorized. 00:00:21.660 --> 00:00:24.219 We really do. But then you step into the world 00:00:24.219 --> 00:00:27.480 of global economics during a massive crisis and 00:00:27.480 --> 00:00:29.879 suddenly that x -ray machine is completely murky. 00:00:30.059 --> 00:00:32.259 Oh, total. You can't just point to a single broken 00:00:32.259 --> 00:00:34.659 bone when the entire system is shutting down. 00:00:34.880 --> 00:00:37.840 So today, we are grabbing the ultimate medical 00:00:37.840 --> 00:00:40.479 chart for the 2008 financial crash. And we are 00:00:40.479 --> 00:00:42.899 using one comprehensive source for this. Right. 00:00:43.000 --> 00:00:45.119 We're using the comprehensive Wikipedia article 00:00:45.119 --> 00:00:47.780 on the American Recovery and Reinvestment Act 00:00:47.780 --> 00:00:50.619 of 2009. Which most people probably just know 00:00:50.619 --> 00:00:53.380 as the stimulus package. Exactly. The stimulus 00:00:53.380 --> 00:00:55.700 package. And our mission for this deep dive is 00:00:55.700 --> 00:00:58.670 to cut through all the political spin. We want 00:00:58.670 --> 00:01:00.950 to see exactly how the government tried to resuscitate 00:01:00.950 --> 00:01:04.010 the US economy, what was actually in this massive 00:01:04.010 --> 00:01:07.349 bill, and what the data actually says about its 00:01:07.349 --> 00:01:10.090 success. Just the raw facts. Just the facts. 00:01:10.280 --> 00:01:13.180 OK, let's unpack this. Well, to really understand 00:01:13.180 --> 00:01:16.079 the sheer scale of this, we have to put ourselves 00:01:16.079 --> 00:01:19.480 back in early 2009. Yeah, the absolute depths 00:01:19.480 --> 00:01:21.900 of the Great Recession. Exactly. It was bleak. 00:01:22.040 --> 00:01:24.040 So before we even look at the price tag of this 00:01:24.040 --> 00:01:26.700 legislation, we really have to establish those 00:01:26.700 --> 00:01:30.260 life or death stakes. Picture the global economy 00:01:30.260 --> 00:01:32.719 like a crashing patient in an emergency room. 00:01:32.900 --> 00:01:35.340 Okay, I like that analogy. The monitors are screaming, 00:01:35.640 --> 00:01:37.900 you know, the vitals are dropping fast, and the 00:01:37.900 --> 00:01:39.879 stimulus package was essentially designed to 00:01:39.879 --> 00:01:43.079 be a massive, unprecedented injection of financial 00:01:43.079 --> 00:01:44.959 adrenaline. Just to keep things going. Right. 00:01:45.359 --> 00:01:47.260 The doctors aren't trying to cure the underlying 00:01:47.260 --> 00:01:50.159 disease in that exact moment. They're just trying 00:01:50.159 --> 00:01:52.519 to keep the patient's heart beating. That is 00:01:52.519 --> 00:01:55.480 a perfect way to look at it. And the medical 00:01:55.480 --> 00:01:57.640 theory they were relying on, while economically 00:01:57.640 --> 00:02:00.060 speaking, was Keynesian theory. Right. John Maynard 00:02:00.060 --> 00:02:02.540 Keynes. Right. And the foundational rationale 00:02:02.540 --> 00:02:05.420 of this bill rests on a very specific mechanism. 00:02:06.120 --> 00:02:08.919 During a severe recession, private spending, 00:02:09.219 --> 00:02:12.479 meaning consumers and businesses, it just plummets. 00:02:12.539 --> 00:02:14.750 People are terrified. Exactly. They are terrified, 00:02:14.810 --> 00:02:17.449 so they stop buying. Companies lose revenue, 00:02:17.550 --> 00:02:19.810 so they fire people. Those fired people stop 00:02:19.810 --> 00:02:21.830 buying even more things. It just becomes this 00:02:21.830 --> 00:02:24.849 death spiral. And Keynesian theory says that 00:02:24.849 --> 00:02:27.469 when the private sector goes into hiding like 00:02:27.469 --> 00:02:30.750 that, the government has to step in. Yes. They 00:02:30.750 --> 00:02:33.469 have to become the spender of last resort. They 00:02:33.469 --> 00:02:35.710 have to aggressively increase public spending 00:02:35.710 --> 00:02:38.770 to offset that massive drop, just to fill the 00:02:38.770 --> 00:02:41.439 void. And the cost to fill that specific void 00:02:41.439 --> 00:02:43.520 was staggering. I mean, the initial estimated 00:02:43.520 --> 00:02:47.939 cost of the bill was $787 billion. Wow. And it 00:02:47.939 --> 00:02:50.960 gets bigger. Later, looking back over the 2009 00:02:50.960 --> 00:02:54.060 to 2019 period, that number was revised up to 00:02:54.060 --> 00:02:57.439 $831 billion. Which is just an astronomical amount 00:02:57.439 --> 00:02:59.699 of money to even wrap your head around. It really 00:02:59.699 --> 00:03:03.020 is. But Section 3 of the Act actually lays out 00:03:03.020 --> 00:03:05.900 the core intent. It wasn't just throwing cash 00:03:05.900 --> 00:03:08.360 blindly. Right, they had a plan. They did. The 00:03:08.360 --> 00:03:11.280 stated purpose was to save and create jobs as 00:03:11.280 --> 00:03:13.919 soon as possible, to assist those who were most 00:03:13.919 --> 00:03:16.539 impacted by the recession, and to invest in long 00:03:16.539 --> 00:03:19.099 -term infrastructure and technology. But, you 00:03:19.099 --> 00:03:21.159 know, knowing the economic theory is one thing. 00:03:21.560 --> 00:03:24.879 Actually figuring out how to spend $831 billion 00:03:24.879 --> 00:03:28.860 effectively is... Entirely different. Oh, absolutely. 00:03:29.139 --> 00:03:30.879 Like, how do you administer that much medicine 00:03:30.879 --> 00:03:32.759 to an entire country? Well, you have to divide 00:03:32.759 --> 00:03:35.479 it up into very specific targeted mechanisms. 00:03:36.000 --> 00:03:38.120 The final breakdown went something like this. 00:03:38.819 --> 00:03:41.659 37 % went to tax incentives. OK, so that's about, 00:03:41.659 --> 00:03:45.460 what, $288 billion? Yep. And then another 18%, 00:03:45.460 --> 00:03:48.120 or $144 billion, went to state and local fiscal 00:03:48.120 --> 00:03:52.139 relief. And the largest chunk... 45%, which is 00:03:52.139 --> 00:03:55.900 $357 billion, was allocated to direct federal 00:03:55.900 --> 00:03:57.979 spending. Here's where it gets really interesting, 00:03:58.099 --> 00:04:00.280 because when you say stimulus package to the 00:04:00.280 --> 00:04:03.039 average person, they immediately picture hard 00:04:03.039 --> 00:04:06.139 hats. Yeah, neon vests, road work. Right, highway 00:04:06.139 --> 00:04:09.620 construction, pouring concrete. But a massive 00:04:09.620 --> 00:04:12.020 chunk of this money was practically invisible. 00:04:12.580 --> 00:04:15.199 Completely invisible. It was designed specifically 00:04:15.199 --> 00:04:18.160 to slip into the economy without people even 00:04:18.160 --> 00:04:20.699 really noticing. Yes, the invisible stimulus 00:04:20.699 --> 00:04:23.319 is arguably the most fascinating psychological 00:04:23.319 --> 00:04:26.319 part of the story. For example, there was a $400 00:04:26.319 --> 00:04:29.399 per worker tax credit. Okay. But the government 00:04:29.399 --> 00:04:32.199 didn't just mail everyone a $400 check. Right, 00:04:32.199 --> 00:04:34.339 because if you mail someone a lump sum during 00:04:34.339 --> 00:04:37.319 a terrifying recession, human psychology kicks 00:04:37.319 --> 00:04:40.250 in. They hoard it. Exactly. They take that four 00:04:40.250 --> 00:04:42.089 hundred dollars and they stuff it into a savings 00:04:42.089 --> 00:04:44.810 account out of fear. It doesn't stimulate anything. 00:04:44.829 --> 00:04:47.370 It just sits there. It completely halts the velocity 00:04:47.370 --> 00:04:49.629 of my velocity of money. Yeah. Which is basically 00:04:49.629 --> 00:04:52.209 how fast a single dollar moves from person to 00:04:52.209 --> 00:04:55.129 person in an economy. So instead, for the last 00:04:55.129 --> 00:04:57.509 half of 2009, the government just tweaked the 00:04:57.509 --> 00:04:59.949 tax withholding tables. Just a tiny adjustment. 00:05:00.189 --> 00:05:03.050 Right. Workers suddenly saw about 15 to 20 dollars 00:05:03.050 --> 00:05:05.930 less withheld from their weekly paychecks. Oh, 00:05:05.949 --> 00:05:09.939 wow. So subtle. It was so subtle that most people 00:05:09.939 --> 00:05:12.000 just spent that extra 20 bucks at the grocery 00:05:12.000 --> 00:05:14.500 store or the gas station without even realizing 00:05:14.500 --> 00:05:17.279 it. The money instantly entered the economy. 00:05:17.500 --> 00:05:20.500 That is brilliant. It bypasses the fear response 00:05:20.500 --> 00:05:22.920 entirely. Yeah, it's very clever. But there are 00:05:22.920 --> 00:05:25.459 some highly visible nuggets, too. I mean, if 00:05:25.459 --> 00:05:28.259 you were buying a house, there was an eight thousand 00:05:28.259 --> 00:05:31.459 dollar first time homebuyer credit to try and 00:05:31.459 --> 00:05:33.379 prop up the collapsing real estate market. I'm 00:05:33.379 --> 00:05:36.050 just falling apart. Completely. And if you lost 00:05:36.050 --> 00:05:39.420 your job... The stimulus added an extra $25 a 00:05:39.420 --> 00:05:42.259 week to your unemployment benefits. And crucially, 00:05:42.639 --> 00:05:45.959 it provided a 65 % subsidy for Cobra Health Insurance. 00:05:46.100 --> 00:05:48.540 Which was a massive lifeline. If you lose your 00:05:48.540 --> 00:05:50.519 job in the U .S., you can keep your employer 00:05:50.519 --> 00:05:52.660 health insurance through Cobra, but you suddenly 00:05:52.660 --> 00:05:54.660 have to pay the entire premium yourself. Which 00:05:54.660 --> 00:05:57.259 is usually impossibly expensive for someone who 00:05:57.259 --> 00:06:00.040 just lost their income. Exactly. So this subsidized 00:06:00.040 --> 00:06:02.740 that cost for up to nine months. And then there 00:06:02.740 --> 00:06:05.379 are the hidden impacts that completely reshaped 00:06:05.379 --> 00:06:07.939 our modern world. completely outside of just 00:06:07.939 --> 00:06:09.920 keeping people afloat. Like the Heddle Tech Act. 00:06:10.220 --> 00:06:13.839 Yes. The ITech Act, which was buried inside this 00:06:13.839 --> 00:06:17.060 stimulus bill, it allocated billions of dollars 00:06:17.060 --> 00:06:19.360 to transition the medical industry to electronic 00:06:19.360 --> 00:06:21.879 health records. It's crazy to think about. It 00:06:21.879 --> 00:06:24.560 is. If you have ever wondered why your doctor 00:06:24.560 --> 00:06:27.120 spends half the appointment typing into a laptop 00:06:27.120 --> 00:06:30.040 now instead of writing on a paper chart, this 00:06:30.040 --> 00:06:33.480 2009 stimulus bill is a major reason why. And 00:06:33.480 --> 00:06:35.790 speaking of hidden lifelines, We really have 00:06:35.790 --> 00:06:39.449 to look at the $53 .6 billion that went directly 00:06:39.449 --> 00:06:41.930 to local school districts. Oh, right. That is 00:06:41.930 --> 00:06:44.430 a prime example of the state and local relief 00:06:44.430 --> 00:06:47.670 portion. Because states, unlike the federal government... 00:06:47.480 --> 00:06:50.060 generally aren't allowed to run massive deficits, 00:06:50.399 --> 00:06:53.100 right? If state tax revenues collapse during 00:06:53.100 --> 00:06:55.699 a recession, they're legally required to balance 00:06:55.699 --> 00:06:57.779 their budget. Exactly. They have to slash spending 00:06:57.779 --> 00:07:00.759 immediately. And education is a huge part of 00:07:00.759 --> 00:07:03.600 state budgets. So that $53 billion wasn't necessarily 00:07:03.600 --> 00:07:06.379 to hire thousands of new extra teachers. It was 00:07:06.379 --> 00:07:08.810 just a patch. It was just to prevent the mass 00:07:08.810 --> 00:07:10.850 layoffs of the teachers who are already in the 00:07:10.850 --> 00:07:13.329 classrooms. Without the federal government stepping 00:07:13.329 --> 00:07:15.850 in to run a deficit on the state's behalf, local 00:07:15.850 --> 00:07:18.129 schools would have been decimated. Though for 00:07:18.129 --> 00:07:20.870 some vulnerable populations, the government did 00:07:20.870 --> 00:07:23.170 just send direct checks. Right. There was a one 00:07:23.170 --> 00:07:27.350 -time $250 payment specifically for social security 00:07:27.350 --> 00:07:30.029 recipients, people on supplemental security income, 00:07:30.550 --> 00:07:33.170 and veterans receiving pensions or disability. 00:07:33.519 --> 00:07:36.459 So you have this incredibly delicate, highly 00:07:36.459 --> 00:07:40.040 targeted economic medicine. It's mixing tax cuts 00:07:40.040 --> 00:07:42.939 with welfare and infrastructure with electronic 00:07:42.939 --> 00:07:46.220 medical records. And here is the big but. The 00:07:46.220 --> 00:07:48.480 problem with government medicine is that politicians 00:07:48.480 --> 00:07:50.959 are the ones writing the prescription. Oh, yeah. 00:07:51.060 --> 00:07:52.920 That's where it gets messy. And the second you 00:07:52.920 --> 00:07:55.959 introduce $800 billion to a room full of politicians, 00:07:56.740 --> 00:07:58.819 pure economic theory goes right out the window 00:07:58.819 --> 00:08:01.819 and you get a vicious legislative war. A total 00:08:01.819 --> 00:08:04.720 battle. Now, because this bill mixed so many 00:08:04.720 --> 00:08:07.959 conflicting ideologies, it sparked intense outrage. 00:08:08.459 --> 00:08:10.759 And just a quick, explicit time out for you listening. 00:08:11.600 --> 00:08:14.240 The historical records we are using today are 00:08:14.240 --> 00:08:17.459 full of incredibly fiery partisan critiques from 00:08:17.459 --> 00:08:20.240 both the political left and the right. Very heated. 00:08:20.480 --> 00:08:23.379 Right. And we are not taking sides or endorsing 00:08:23.379 --> 00:08:26.879 either camp here. Our job is strictly and impartially 00:08:26.879 --> 00:08:29.519 to hold up the mirror and show you exactly what 00:08:29.519 --> 00:08:32.279 both sides were arguing at the time, as documented 00:08:32.279 --> 00:08:35.039 in our source. And the historical record shows 00:08:35.039 --> 00:08:38.480 a stark, bitter partisan divide. Not a single 00:08:38.480 --> 00:08:40.259 Republican in the House of Representatives voted 00:08:40.259 --> 00:08:43.259 for the bill. Zero. Zero. Yeah. And in the Senate, 00:08:43.360 --> 00:08:45.679 only three Republicans crossed party lines to 00:08:45.679 --> 00:08:48.379 vote for it. That was Susan Collins, Olympia 00:08:48.379 --> 00:08:50.740 Snow, and Arlen Specter. Well, let's look at 00:08:50.740 --> 00:08:52.740 the critique from the left wing first. Yeah. 00:08:52.759 --> 00:08:54.759 Prominent economists like Paul Krugman and Joseph 00:08:54.759 --> 00:08:57.159 Stiglitz, they were furious with the final bill. 00:08:57.240 --> 00:08:59.200 They really were. Their argument was that the 00:08:59.200 --> 00:09:01.320 stimulus was actually way too small to fill the 00:09:01.320 --> 00:09:03.500 economic hole. They argued it contained too many 00:09:03.500 --> 00:09:05.399 tax cuts, which they felt were compromised away 00:09:05.399 --> 00:09:08.320 in a failed bid for bipartisan support. And on 00:09:08.320 --> 00:09:10.620 the flip side, the critique from the right wing 00:09:10.620 --> 00:09:13.559 was just as fierce. Groups like the Cato Institute 00:09:13.559 --> 00:09:16.159 and economists like John Lott argued that the 00:09:16.159 --> 00:09:18.779 stimulus was actually an impediment to economic 00:09:18.779 --> 00:09:21.299 growth. An impediment. Yeah. Their position was 00:09:21.299 --> 00:09:23.539 that the government should have focused on lowering 00:09:23.539 --> 00:09:26.820 tax rates permanently and reducing the burden 00:09:26.820 --> 00:09:29.799 of government rather than flooding the zone with 00:09:29.799 --> 00:09:32.809 all this public spending. Completely different 00:09:32.809 --> 00:09:35.710 philosophy. Completely. In fact, the sheer scale 00:09:35.710 --> 00:09:38.730 of this spending bill spurred a massive conservative 00:09:38.730 --> 00:09:41.590 backlash that actually helped birth the Tea Party 00:09:41.590 --> 00:09:43.769 movement. It's wild to think about the pressure 00:09:43.769 --> 00:09:46.570 cooker they were in. I mean, the frantic final 00:09:46.570 --> 00:09:48.549 moments of getting this passed sound like an 00:09:48.549 --> 00:09:50.710 absolute nightmare. The final conference report 00:09:50.710 --> 00:09:52.909 was literally passed with handwritten provisions 00:09:52.909 --> 00:09:54.750 scribbled in the margins. That just shows you 00:09:54.750 --> 00:09:56.889 the sheer panic of the moment. And a perfect 00:09:56.889 --> 00:09:59.149 example of that last minute scrambling is the 00:09:59.149 --> 00:10:03.139 alternative minimum tax or AMT. Oh, right. The 00:10:03.139 --> 00:10:06.200 Senate forced a 70 billion dollar addition to 00:10:06.200 --> 00:10:09.340 the bill just to patch the AMT. Which I know 00:10:09.340 --> 00:10:12.320 sounds like incredibly boring tax jargon. It 00:10:12.320 --> 00:10:15.419 does. The mechanism behind it is fascinating. 00:10:15.940 --> 00:10:18.480 The alternative minimum tax was originally designed 00:10:18.480 --> 00:10:21.779 in the 1960s to make sure ultra wealthy taxpayers 00:10:21.779 --> 00:10:25.019 couldn't use loopholes and deductions to avoid 00:10:25.019 --> 00:10:27.539 paying taxes entirely. Right. But there was a 00:10:27.539 --> 00:10:30.240 massive flaw in how it was written. The AMT was 00:10:30.240 --> 00:10:33.299 never indexed to inflation. Oh, no. Yeah. So 00:10:33.299 --> 00:10:35.440 over the decades, as the cost of living went 00:10:35.440 --> 00:10:38.039 up and middle class incomes naturally rose to 00:10:38.039 --> 00:10:41.220 keep pace. The AMT didn't adjust, so it started 00:10:41.220 --> 00:10:43.860 capturing people it was never intended for. So 00:10:43.860 --> 00:10:47.100 without this 70 billion dollar patch shoved into 00:10:47.100 --> 00:10:50.220 the stimulus bill at the 11th hour, roughly 24 00:10:50.220 --> 00:10:52.879 million middle class taxpayers would have suddenly 00:10:52.879 --> 00:10:55.179 been taxed as if they were ultra wealthy. Which 00:10:55.179 --> 00:10:57.220 would have been political suicide. And a massive 00:10:57.220 --> 00:10:59.480 economic drain right in the middle of a recession. 00:10:59.679 --> 00:11:02.230 Exactly. If we connect this to the bigger picture, 00:11:02.710 --> 00:11:05.269 this single piece of legislation essentially 00:11:05.269 --> 00:11:07.190 drew the battle lines for the next decade of 00:11:07.190 --> 00:11:09.549 American politics. It really set the stage. It 00:11:09.549 --> 00:11:12.129 did. The arguments over the size of government, 00:11:12.529 --> 00:11:15.110 the purpose of taxation, and how to handle the 00:11:15.110 --> 00:11:18.190 national debt all crystallized right here in 00:11:18.190 --> 00:11:21.250 early 2009. But, you know, passing the bill, 00:11:21.370 --> 00:11:23.529 even with all that fighting, was only half the 00:11:23.529 --> 00:11:27.629 battle. Once that $831 billion hit the real world, 00:11:28.000 --> 00:11:30.720 The friction of reality set in. Friction is the 00:11:30.720 --> 00:11:32.700 perfect word. You can write whatever you want 00:11:32.700 --> 00:11:34.840 on a piece of paper in Washington, but the real 00:11:34.840 --> 00:11:37.559 world is messy. So messy. Let's look at the Buy 00:11:37.559 --> 00:11:40.259 American provision, for instance. OK, yeah. This 00:11:40.259 --> 00:11:41.740 is one of those things that sounds great on a 00:11:41.740 --> 00:11:44.740 bumper sticker. If we are spending American tax 00:11:44.740 --> 00:11:47.620 dollars on public works, we should require them 00:11:47.620 --> 00:11:51.000 to use iron, steel, and manufactured goods produced 00:11:51.000 --> 00:11:53.080 in the United States. Keep the money at home. 00:11:53.200 --> 00:11:55.379 Keep it at home. Politically, it's a very easy 00:11:55.379 --> 00:11:58.730 sell. But economically, in a highly complex globalized 00:11:58.730 --> 00:12:01.669 world, it is incredibly dangerous. Think about 00:12:01.669 --> 00:12:04.350 modern supply chains. If the US builds a bridge, 00:12:04.529 --> 00:12:06.370 they might need specialized steel from Canada. 00:12:06.590 --> 00:12:09.549 Right. But Canada relies on heavy machinery built 00:12:09.549 --> 00:12:12.919 in the US to mine the iron for that steel. If 00:12:12.919 --> 00:12:16.620 the U .S. bans Canadian steel to keep money at 00:12:16.620 --> 00:12:19.419 home, Canada retaliates. Which is exactly what 00:12:19.419 --> 00:12:21.320 happened. Canada enacted its own restrictions 00:12:21.320 --> 00:12:23.279 on trade with the U .S. We were on the brink 00:12:23.279 --> 00:12:25.600 of a trade war. Just from one provision. Right. 00:12:25.700 --> 00:12:28.200 And if both countries locked down, suddenly the 00:12:28.200 --> 00:12:30.679 steel mills in Canada and the machinery factories 00:12:30.679 --> 00:12:33.179 in the U .S. both shut down and you have made 00:12:33.179 --> 00:12:36.470 the recession worse. Precisely. Ultimately, the 00:12:36.470 --> 00:12:38.549 U .S. and Canada had to negotiate an agreement 00:12:38.549 --> 00:12:41.590 a year later to exempt Canadian companies just 00:12:41.590 --> 00:12:43.629 to stop the bleeding and get the supply chains 00:12:43.629 --> 00:12:45.850 moving again. And then there is the transparency 00:12:45.850 --> 00:12:48.950 issue. The government launched a website, Recovery 00:12:48.950 --> 00:12:52.129 .gov, to track all this spending down to the 00:12:52.129 --> 00:12:54.470 street level, which eventually required a $9 00:12:54.470 --> 00:12:57.350 .5 million redesign. Just for the website? Just 00:12:57.350 --> 00:13:00.149 for the website. And the goal was to build public 00:13:00.149 --> 00:13:02.629 trust. Well, wait, I remember this. Didn't this 00:13:02.629 --> 00:13:05.090 ultra transparency backfire spectacularly with 00:13:05.090 --> 00:13:08.509 the ham scandal? Oh, yes. The two pound ham. 00:13:08.649 --> 00:13:10.929 The Drudge Report ran this massive headline saying 00:13:10.929 --> 00:13:14.509 the USDA bought two pounds of ham for over a 00:13:14.509 --> 00:13:16.610 million dollars. The infamous two pound ham. 00:13:16.669 --> 00:13:19.210 The headline caused absolute outrage. I mean, 00:13:19.350 --> 00:13:21.389 a million dollars for two pounds of meat. It 00:13:21.389 --> 00:13:23.129 looked like the ultimate proof of government 00:13:23.129 --> 00:13:25.350 waste. But that was a complete data entry illusion, 00:13:25.350 --> 00:13:28.809 right? Completely. The USDA had to issue a frantic 00:13:28.809 --> 00:13:31.350 clarification. They hadn't bought two pounds 00:13:31.350 --> 00:13:34.210 of ham for a million dollars. They had bought 00:13:34.210 --> 00:13:38.730 760 ,000 pounds of ham to stock food banks at 00:13:38.730 --> 00:13:41.830 a very reasonable cost of about $1 .50 per pound. 00:13:41.970 --> 00:13:44.809 OK, so what happened? The problem was the contract 00:13:44.809 --> 00:13:47.409 simply stated the meat was to be packaged in 00:13:47.409 --> 00:13:49.889 two pound increments. Oh my gosh. And the public 00:13:49.889 --> 00:13:52.309 database just scraped the package size field, 00:13:52.389 --> 00:13:54.769 completely ignoring the total volume field. Yep. 00:13:55.149 --> 00:13:57.789 It is absurd, but because it was on an official 00:13:57.789 --> 00:14:00.789 tracking site, it dominated the news cycle. Which 00:14:00.789 --> 00:14:03.450 brings me to this question. Does ultra transparency, 00:14:03.889 --> 00:14:05.730 like tracking every single dollar on a public 00:14:05.730 --> 00:14:08.539 website, actually build public trust? or does 00:14:08.539 --> 00:14:11.299 it just create a vulnerability for out of context 00:14:11.299 --> 00:14:13.860 scandals like the infamous two pound ham? That 00:14:13.860 --> 00:14:16.179 is the million dollar question, or I guess the 00:14:16.179 --> 00:14:18.419 million dollar ham question. Right. And it wasn't 00:14:18.419 --> 00:14:21.019 just data errors, there was also intense scrutiny 00:14:21.019 --> 00:14:24.299 on the green energy grants. Section 1603 gave 00:14:24.299 --> 00:14:27.399 cash grants to solar companies, which eventually 00:14:27.399 --> 00:14:30.759 led to a massive 2016 Senate Finance Committee 00:14:30.759 --> 00:14:32.440 investigation. Right, because of how the money 00:14:32.440 --> 00:14:35.139 was used. Yeah. In one instance, the US government 00:14:35.139 --> 00:14:37.700 actually had to ask a Spanish company to return 00:14:37.700 --> 00:14:40.820 a million dollars it had received. What's fascinating 00:14:40.820 --> 00:14:43.639 here is how the demand for immediate economic 00:14:43.639 --> 00:14:47.799 relief completely clashes with the slow, bureaucratic 00:14:47.799 --> 00:14:50.480 reality of building permanent infrastructure. 00:14:51.000 --> 00:14:53.940 Which brings us to the shovel -ready myth. Yes. 00:14:54.159 --> 00:14:56.100 This was the big promise sold to the public. 00:14:56.720 --> 00:14:58.519 We have all these shovel -ready projects, you 00:14:58.519 --> 00:15:01.080 know, bridges and roads just waiting to go. We 00:15:01.080 --> 00:15:02.879 just need to hand over the money. and people 00:15:02.879 --> 00:15:05.399 will be pouring concrete tomorrow. But by 2010, 00:15:05.700 --> 00:15:07.519 President Obama himself admitted that there is 00:15:07.519 --> 00:15:10.779 really no such thing as a shovel ready infrastructure 00:15:10.779 --> 00:15:14.000 project. It's just a myth. It is. The red tape, 00:15:14.059 --> 00:15:16.500 the environmental impact reviews, the local zoning 00:15:16.500 --> 00:15:19.360 laws, the public planning delays. You simply 00:15:19.360 --> 00:15:21.980 cannot turn a billion dollars into a new highway 00:15:21.980 --> 00:15:24.360 overnight. The modern administrative state just 00:15:24.360 --> 00:15:26.480 isn't built to move that fast. OK, so we've seen 00:15:26.480 --> 00:15:28.419 the economic theory. We've watched the vicious 00:15:28.419 --> 00:15:31.419 politics unfold and we've navigated the very 00:15:31.419 --> 00:15:34.289 messy roll out with global trade wars and data 00:15:34.289 --> 00:15:37.389 entry ham scandals. Quite a journey. It is. But 00:15:37.389 --> 00:15:40.190 ultimately, we have to look at the data to answer 00:15:40.190 --> 00:15:45.350 the ultimate question. Did the $831 billion actually 00:15:45.350 --> 00:15:48.179 do what it was supposed to do? What is a final 00:15:48.179 --> 00:15:50.639 report card? Well, if we look at the final assessments 00:15:50.639 --> 00:15:52.980 from the Nonpartisan Congressional Budget Office 00:15:52.980 --> 00:15:55.940 or CBO, the short -term answer is yes. Okay. 00:15:56.419 --> 00:15:59.100 The IRA did boost real GDP, which is the total 00:15:59.100 --> 00:16:01.779 value of all goods and services produced adjusted 00:16:01.779 --> 00:16:05.200 for inflation. By one estimate, it boosted GDP 00:16:05.200 --> 00:16:08.299 by up to 9 .2 percent at its peak impact. That's 00:16:08.299 --> 00:16:10.799 significant. It is. It also lowered the unemployment 00:16:10.799 --> 00:16:13.259 rate. And what about the actual jobs? The official 00:16:13.259 --> 00:16:15.919 estimates suggest it saved or created up to 3 00:16:15.919 --> 00:16:18.639 .6 million jobs. Hold on. We have to talk about 00:16:18.639 --> 00:16:21.620 that specific phrasing. Saved or created. Yeah, 00:16:21.700 --> 00:16:24.080 that's tricky. That became a massive controversy 00:16:24.080 --> 00:16:27.019 in itself because it's essentially a counterfactual. 00:16:27.580 --> 00:16:29.559 You are asking a business owner to prove that 00:16:29.559 --> 00:16:31.820 they would have fired someone but didn't because 00:16:31.820 --> 00:16:33.899 of the government money. It's almost impossible 00:16:33.899 --> 00:16:37.200 to verify. It is incredibly difficult to measure. 00:16:37.799 --> 00:16:41.320 Critics attacked that metric relentlessly. And 00:16:41.320 --> 00:16:44.080 there is data to support their skepticism regarding 00:16:44.080 --> 00:16:48.320 how permanent those jobs really were. Like what? 00:16:48.899 --> 00:16:50.679 Well, a study by the Reason Foundation looked 00:16:50.679 --> 00:16:53.519 at a sample of over 8 ,000 companies that received 00:16:53.519 --> 00:16:56.759 stimulus money. They found that only 23 % of 00:16:56.759 --> 00:16:59.399 those sampled companies hired new workers and 00:16:59.399 --> 00:17:01.600 actually kept them after the project money ran 00:17:01.600 --> 00:17:05.240 out. Only 23 %? Yeah. 30 % hired workers, but 00:17:05.240 --> 00:17:07.700 laid them all off the second the government funding 00:17:07.700 --> 00:17:10.079 stopped. So for a lot of those workers, it wasn't 00:17:10.079 --> 00:17:12.400 a permanent career. It was just a temporary bridge. 00:17:13.140 --> 00:17:15.440 Exactly. And speaking of the long term, we really 00:17:15.440 --> 00:17:17.519 have to look at the consequences of borrowing 00:17:17.519 --> 00:17:22.099 $831 billion. Yes. The CBO also had to model 00:17:22.099 --> 00:17:24.019 the long term impact, and they estimated that 00:17:24.019 --> 00:17:27.019 by 2019, so 10 years later, the stimulus would 00:17:27.019 --> 00:17:29.140 actually cause a slight net decrease in GDP. 00:17:29.359 --> 00:17:31.180 Wait, a decrease? Yeah, it's somewhere between 00:17:31.180 --> 00:17:34.559 0 .1 % and 0 .3%. How does injecting almost a 00:17:34.559 --> 00:17:36.799 trillion dollars lead to a long term decrease? 00:17:36.980 --> 00:17:38.940 Because of an economic concept called crowding 00:17:38.940 --> 00:17:41.089 out. Crowding out? Yeah. When the government 00:17:41.089 --> 00:17:45.650 needs $831 billion, it doesn't just print it, 00:17:45.670 --> 00:17:48.529 right? It issues bonds. It borrows it from the 00:17:48.529 --> 00:17:51.690 global financial market. And that absorbs a massive 00:17:51.690 --> 00:17:54.069 amount of investment finance. You know, I like 00:17:54.069 --> 00:17:56.210 to think of it like planting a massive oak tree 00:17:56.210 --> 00:17:58.940 in a small garden. Oh, I like where this is going. 00:17:59.299 --> 00:18:01.519 The oak tree is the government debt. It looks 00:18:01.519 --> 00:18:04.259 great. It's huge and imposing. But underneath 00:18:04.259 --> 00:18:07.779 the surface, its massive roots are soaking up 00:18:07.779 --> 00:18:10.220 all the water and nutrients in the soil. Right. 00:18:10.460 --> 00:18:12.480 So none of the smaller private plants around 00:18:12.480 --> 00:18:15.299 it have the resources to grow. That is a brilliant 00:18:15.299 --> 00:18:18.000 way to visualize it. In the short term, during 00:18:18.000 --> 00:18:20.359 a crisis, those private plants aren't growing 00:18:20.359 --> 00:18:21.980 anyway, so it doesn't matter if the oak tree 00:18:21.980 --> 00:18:23.680 takes the water. Because everything is dying 00:18:23.680 --> 00:18:27.039 anyway. Exactly. But in the long term, as the 00:18:27.039 --> 00:18:29.980 economy tries to recover, that massive government 00:18:29.980 --> 00:18:32.680 debt crowds out the private growth. Money that 00:18:32.680 --> 00:18:34.940 investors would have used to fund new private 00:18:34.940 --> 00:18:38.000 businesses is instead tied up in government bonds. 00:18:38.200 --> 00:18:41.160 Wow. This raises an important question, though. 00:18:41.319 --> 00:18:43.619 about how we measure success when dealing with 00:18:43.619 --> 00:18:46.119 counterfactuals. What do you mean? Well, we can 00:18:46.119 --> 00:18:48.099 measure exactly what happened. We know the GDP 00:18:48.099 --> 00:18:50.920 numbers. We know the debt numbers. But we can 00:18:50.920 --> 00:18:53.519 never truly measure how bad the alternate reality 00:18:53.519 --> 00:18:55.759 would have been if the government had done nothing. 00:18:55.920 --> 00:18:58.319 Right. If the patient dies on the table, you 00:18:58.319 --> 00:19:00.440 know you failed. Exactly. But if the patient 00:19:00.440 --> 00:19:04.140 survives, you will spend the next 10 years arguing 00:19:04.140 --> 00:19:06.940 over whether the adrenaline shot was too big, 00:19:07.160 --> 00:19:09.779 too small. or whether they would have miraculously 00:19:09.779 --> 00:19:11.900 recovered on their own without the medicine. 00:19:12.119 --> 00:19:14.200 Which is the eternal burden of economic policy. 00:19:14.539 --> 00:19:17.380 It really is. Which brings us back to you, the 00:19:17.380 --> 00:19:21.059 listener. Why does an $800 billion bill from 00:19:21.059 --> 00:19:24.400 2009 matter to your life right now? Yeah, why 00:19:24.400 --> 00:19:26.819 should they care? Because understanding the ARRA 00:19:26.819 --> 00:19:29.819 is essentially the ultimate cheat code for understanding 00:19:29.819 --> 00:19:32.900 how governments respond to modern crises. It 00:19:32.900 --> 00:19:35.380 exposes the eternal tug of war between doing 00:19:35.380 --> 00:19:38.019 things fast, doing things right, in doing things 00:19:38.019 --> 00:19:39.799 politically. The three points of the triangle. 00:19:40.319 --> 00:19:42.839 Exactly. When the next crisis hits, and there's 00:19:42.839 --> 00:19:45.420 always a next crisis, the emergency legislation 00:19:45.420 --> 00:19:47.759 is going to look a lot like this with the exact 00:19:47.759 --> 00:19:50.940 same messy compromises. It's the blueprint for 00:19:50.940 --> 00:19:53.759 better or worse. You will see the same debates 00:19:53.759 --> 00:19:57.099 over tax tweaks versus infrastructure and the 00:19:57.099 --> 00:19:59.980 exact same struggles with supply chains. So what 00:19:59.980 --> 00:20:02.720 does this all mean? It leaves us with a fascinating 00:20:02.720 --> 00:20:06.119 paradox to consider. Okay, lay it on me. If shovel 00:20:06.119 --> 00:20:09.779 -ready projects are a complete myth and navigating 00:20:09.779 --> 00:20:12.480 the red tape of building infrastructure is simply 00:20:12.480 --> 00:20:15.700 too slow for a sudden economic emergency, how 00:20:15.700 --> 00:20:18.740 can a society actually prepare its physical world 00:20:18.740 --> 00:20:21.549 before the next crisis hits? That is the real 00:20:21.549 --> 00:20:23.650 challenge. How do we build systems so that when 00:20:23.650 --> 00:20:26.109 the emergency strikes, the money doesn't just 00:20:26.109 --> 00:20:29.130 sit in a bank account waiting for years of environmental 00:20:29.130 --> 00:20:31.250 reviews to clear? Because as we've learned, you 00:20:31.250 --> 00:20:33.049 can't start drawing up the blueprints for the 00:20:33.049 --> 00:20:35.069 hospital while the patient is already crashing 00:20:35.069 --> 00:20:37.309 in the emergency room. You have to build it beforehand. 00:20:37.470 --> 00:20:40.269 You really do? Exactly. Something to think about 00:20:40.269 --> 00:20:42.349 the next time you see a massive spending bill 00:20:42.349 --> 00:20:44.500 debated on the news. We want to thank you so 00:20:44.500 --> 00:20:46.819 much for joining us on this deep dive. Keep asking 00:20:46.819 --> 00:20:49.599 questions, keep looking past the headlines, and 00:20:49.599 --> 00:20:50.640 we will catch you next time.