About a year ago I wrote a post called “Keynesian Economics is like Prescribing Crack for Coke Addicts“.  Obama’s $700 billion Stimulus package had just been signed, with pretty much all of the Republicans voting against it.

At the time, I really didn’t know if it would work.  Keynes’ economic theories had never been fully tested in this type of a crisis scenario…and we were certainly in one.  So here we are a year later….did it work?

First of all, a bit of a clarification:  The American Recovery and Reinvestment Act signed by Barack Obama is “the stimulus.”  This is the money that went to fund road projects and pay firemen.  It’s been called “the stimulus package” or “The recovery act”, and every Republican (except 3) voted AGAINST it.  The Recovery Act contained the following provisions:

1. Financial assistance to states that were about to fire scores of workers, from firefighters to police officers to teachers, as well as an extension of unemployment benefits and generous COBRA health insurance subsidies.
2. Spending on new infrastructure and manufacturing: those newly smoothed roads and highways on your commute to work, along with spending on transit and green energy technology.
3. The largest middle class tax cut in American history — $288 billion in tax relief which, I might add, every Republican (save for three) voted against.

Unfortunately many Americans confuse the stimulus package with “the bailout”.  TARP.  The $700 billion Troubled Asset Relief Program signed by George W. Bush.   Hundreds of banks received money from this program…a few have repaid…many have not.

A recent CNN poll showed that 54% of Americans think the stimulus has helped bankers and investors.  Obama is losing the PR battle, because Americans think that the Stimulus and the Bailout are the same:  They’re Not.   While there is much to complain about TARP, the Recovery Act appears to be working.   Wall Street seems to think so:

Okay…but that’s just Wall Street…what about jobs?

Looks  pretty good there too.   Okay..but these numbers might be fudged.  How about GDP?  That’s the real pulse of the economy, right?

So does this mean that Keynes is vindicated?   That supply-side economics is dead?   That Adam Smith’s invisible hand has vanished?

I don’t know the answer…I’m just a piano player.  But I do know that it looks like we may have dodged a very big bullet…for now.  For more on this, visit:  Bob Cesca: Happy Anniversary, Recovery Act.