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Special Edition: Following the Stimulus Money: Who's It Going to, What It's Being Used For, and If It's Enough to Get the Economy Back on Track

Aired January 23, 2010 - 13:00   ET



ALI VELSHI, CNN HOST: America's economy on the brink. Banks failing on Wall Street. The housing market collapses, weighed down by risky mortgages. The stock market plummets. Credit lines run dry. Americans lose confidence, and lose jobs.



VELSHI: President Barack Obama takes the oath of office and promises to jump-start the economy in the form of a massive stimulus bill.

OBAMA: These are extraordinary times and it calls for swift and extraordinary action.

VELSHI: And swift and extraordinary action he delivered with the stroke of a pen on February 17, 2009, President Obama signed into law the biggest stimulus package in the history of the country.


VELSHI: Welcome to our special edition of YOUR MONEY, I'm Ali Velshi. Christine Romans is on assignment this week.

Did the stimulus accomplish what the president hoped it would? In the next hour we'll follow the money looking at who it's going to what it's being used for and whether it's enough to get the economy back on track for good. Joining me here in the studio and via satellite is an esteemed panel of experts. We will get to them all in a moment.

But first, let's take a look at some of the steps the government has taken to hoist up this economy. We've got them for you here in our recovery piggy bank. You probably remember the things that went into this recovery, the $700 billion TARP that was the money that the government brought up and insured troubled assets to strengthen the financial sector back in 2008. We're not talking about that right now.

Then there's the money that the Federal Reserve put into the system, $1.3 trillion worth of securities in order to keep mortgage rates around 5 percent right now, at historic lows. We are not talking about that for the moment, either. This is what we're talking about, the stimulus bill. The government's $787 billion stimulus bill and this is the money that we are tracking for you this hour. The $787 billion comes in many forms, and let's take a look at what some of those are.

Where did this money go to? And how does it break down? You can see here the largest proportion of it went towards tax relief, $288 billion. This is relief for individuals, businesses and incentives for states, $129 billion of it went for health care coverage supporting Medicare costs and technology products.

There are other areas; too, $116 billion went towards the vulnerable. People who need assistance, like food stamps and unemployment assistance, $104 billion went to education and science, $66 billion went to green projects, and $48 billion to transportation improvements and highway construction, and another $34 billion went to other assorted projects.

Now of the $787 billion, $413 billion, a little more than half of it is spoken for. It's been dolled out in the form of tax breaks, spending projects, other obligations, and that leaves us with about $374 billion leftover, about half of which will be for more tax breaks.

We've got a great panel of experts with us for the hour, but let's start with CNN senior political analyst David Gergen. David, the simple question so many people are asking. Is the stimulus working so far?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Ali, it certainly helped, and I think when the government throws this much money at the economy, clearly, it's helped to save jobs, state and local government. Clearly eased the burden that many have felt from unemployment. A lot of these tax breaks have helped, but whether it has helped in the way Americans expected is a separate question.

And so far, there's a lot of controversy among the American people about whether this has been a good idea or not. In part, a lot of the money has had invisible effects. The government, the Obama administration claims 1.5 to 2 million jobs have either been saved or created, but this comes at a time when over the course of the year we lost on net 4 million jobs so a lot of Americans look at this and say, jobs? Where are the jobs?

We're actually still losing jobs. That's why it's helped economically, the impact is hard to measure, but politically it is much more controversial.

VELSHI: Let's take quick look at that. Back in January of 2008, we lost 741,000 jobs in one month. That's the worst it's been during this recession. As you can see on this chart, every month started to improve.

We fell back a little bit in the middle of the year, but again we started to improve losing fewer and fewer jobs each month, until November, where we actually had a small gain of about 4,000 jobs, and then in December we dropped back down again having lost 85,000 jobs.

I want to ask Lakshman Achuthan, Lakshman you feel that, in fact, this is not all about stimulus. In fact, stimulus is only effective on the margins when it comes to jobs creation?

LAKSHMAN ACHUTHAN, MANAGING DIR., ECONOMIC CYCLE RESEARCH INST: Look, the business cycle is much more powerful than Washington. Washington likes to, or has the illusion that they have some control over the economy in the near term. I think the electorate likes to share that illusion. It's just not true. This business cycle turning, as it was turning --

VELSHI: Let me stop you for a second. When you say "the business cycle" what are you talking about? Like the weather cycle?

ACHUTHAN: No, no. Look, we live in a free market economy. This is a capitalist economy. Part and parcel of a capitalist economies are upswings and downswings in economic activity. It has nothing to do with stimulus package or bad policy or good policy. It's going to happen anyway. All right?

There's been -- I think we've had for a couple of decades a relatively moderate business cycle, and there was a lot of patting ourselves on the back saying oh we did a good job. We may have just been lucky to a degree.

VELSHI: Chris, you looked puzzled by that.

CHRYSTIA FREELAND, U.S. MANAGING EDITOR, "FINANCIAL TIMES:" Not puzzled but I disagree. I think we are being, we are giving the government and not just the U.S. government, but global governments, far too little credit, and we are forgetting how terrible things were in 2008.

Now, I think that what has happened, when history looks back on the past couple of years, we are going to say, world government and world business were crazy up to 2007 that we didn't learn any of the lessons of history.

The deregulatory bash was a real problem, but when they looked at the response not just from Washington but around the world to the crisis of 2007, 2008, people are going to say, we learned the lessons of the great depression. We could have had -- we could right now be in a global depression, instead, governments around the world did two important things.

They pumped money into the economy and they rescued the global financial system. Did they do that perfectly? Absolutely not, but why are we now talking about ...

VELSHI: Everybody hold on at that point. That is clearly where this discussion hinges and so we want to have a lot -- I can see from every body's body language and in D.C. You've hit a raw nerve here and I think it might be a nerve that many of you in the audience share. Stay with us. We've got a stellar panel here to discuss the effects of this stimulus bill on the economy. Is it working? Who got the money, and has anybody been miss using it? We're going to talk about this and most importantly we are going to talk about jobs and how you can benefit from them. Stay with us. This is a special edition of YOUR MONEY.


VELSHI: This is a special edition of YOUR MONEY. The $787 billion stimulus was advertised as a way to stem the tide of crippling job loss. Optimistic predictions of 8 percent unemployment that Doug was talking about by the president's council of economic advisers were not true. But would we be far worse off had the stimulus not passed?

Let's take a look at some of the stuff that was supposed to happen in stimulus. There was this was phase one that was described. Jessica talked to us how this is different. Phase one, was emergency, was rescue, money for food stamps, for Medicaid, for billing budget gaps and obviously for saving jobs.

Phase two is the real heavy longer term job creation phase. Infrastructure, building roads and bridges and things like that, that would have a longer term effect and employ more people.

Construction, obviously hitting one of the industries that has been so hard-hit throughout this recession, and research, these are ways to create jobs. We need to find out whether these are working. Some of the issues that you might be wondering about is, whether it's working and whether this is the right time to judge whether it's working.

Let's go to Donna Brazile, she is part of our panel, she is in Washington, D.C. Donna is this the right time to be judging whether this is working given that we actually put all our stimulus out there and number two, in fairness, despite your affiliations, your political affiliations, do you think this has worked so far?

DONNA BRAZILE, CNN POLITICAL CONTRIBUTOR: Well, as you well know, Ali, I'm in Seattle, Washington, the other Washington. The economy was shed well over 20,000 jobs per day when President Obama signed the American Recovery and Reinvestment Act. The economy is on the mend, more jobs are being created as a result of the government's stimulus program.

But, Ali I think what most Americans are concerned about today is, whether or not the jobs that are being created will be jobs that are permanent. We see more temporary workers being hired. That's a good sign that eventually if the economy is fully on the rebound, they may find permanent work, but I don't think the president is satisfied.

I don't think the American people right now are satisfied. They want to see the economy heal. Heal itself, so that the private sector continues to grow, and Main Street can rebound as well as Wall Street.

VELSHI: A few moments ago we had a conversation that became heated when Chrystia Freeland said that we are giving the U.S. government and other governments of the world far too little credit for the intervention that possibly stopped the next great depression.

Bill Rogers, former chief economist with the Department of Labor, you have studied clearly, in fact I've seen your research about jobs during this recession. What do you have to say about what Chrystia said about the effectiveness of this stimulus?

BILL ROGERS, FMR. CHIEF ECOMIST, DEPARTMENT OF LABOR: We're in the game of predictions and generating forecasts, and there are six studies, the economic advisers, CBO, the IMF is now coming out with some numbers tomorrow that find that, you know, the counterfactual, what things would have looked like had we not acted in the United States, in the United Kingdom, in Japan, we would be far, far worse off.

And these studies are finding that instead of turning us out into lowering unemployment, we stopped the bleeding, that was the big phrase when I worked at the Labor Department. We stopped the bleeding, and actually some people have even estimated that almost 100 percent of China's sort of growth is related to the managing economy.

VELSHI: Let me bring in Ed ...

ROGERS: 1825.

VELSHI: A political view on this. Donna said it may be working, or parts of it may be working. A lot of Americans don't believe its working. So ultimately this still comes back to, is it working if it's not working politically?

ED ROLLINS, CNN POLITICAL CONTRIBUTOR: It worked in some places. I think the bottom line is this was a rush. This was taking $800 billion and throwing it out. Instead of doing some strategic planning, which Congress never does, they grabbed whatever was around the House Appropriations Committee. Staff came forward with a bunch of things. They were talking about transportation. There is very little in this for transportation.

The bottom line, is the transportation refinance bill, which normally would be passed this year is not being passed, so the bottom line is that a lot of projects across this country are unfunded that would create real jobs, long-term jobs. You know, can $800 billion help?

It helps somewhat, but we have to borrow it, we have to pay that money back, to a certain extent, if they would have taken 30, 45 days longer to do this bill I think they could have made it a real stimulus bill as opposed to ...

FREELAND: But maybe they didn't have time. You only had -- we were in a crises. This was an emergency room, it wasn't a long-term planning moment and maybe had you waited 30 or 45 days you wouldn't have had anything go through ...

ACHUTHAN: And I -- this is why you do not guide the economy with the Congress. OK? Because it takes a long time. Remember; let's be honest about what happened here with stimulus. There was a stimulus, $150 billion at the beginning of 2008 when, excuse me, of 2007, when Bernanke freaked out, went up to George Bush and said we need a stimulus and the Congress altogether quickly spent $150 billion, sank like a stone because the business cycle was tanking.

It is much bigger than the money. Excuse me; in the fall when Lehman goes under, you spend over a trillion dollars propping up the financial system. That is a big deal.

FREELAND: And the ...

ACHUTHAN: Excuse me.

FREELAND: Even after the collapse of Lehman, it's hard to put this through the political process.

ACHUTHAN: That did to your point earlier, made a difference in terms of keeping us out of the abyss. And then the business cycle takes over, and you start a turn, and whoever is standing there is going to get credit. I'm not saying the $787 didn't do something, it helped confidence, and it helped reinforce this. But it is not the reason your having a recovery ...

ROGERS: It is independent research that is finding non-trivial facts, some of the work I just did recently, we found looking at the contracts, grants and loans, on average, they've gone to states with higher unemployment rates, states that have bigger drops in pay role and the job creation in those states was higher.

VELSHI: David Gergen in Washington, you can see where this conversation is going, and it is very reflective of how the conversation is going in America, between people who say we needed to do something, it was an emergency, there was bleeding, and others who say it might have been part of a cycle, and yet others who say why didn't we didn't we just take more time and think this out differently?

GERGEN: Yes. It's going to be an interesting question of what people will say ten years from now. My judgment is that a number of economists will say that government intervention did make a difference, in preventing us from going over a cliff, but analytically they will say with more than the stimulus, it was very importantly the Federal Reserve intervening in 2008 as well as 2009.

Massive intervention by the Federal Reserve. In addition it was the TARP program started under George W. Bush, continued under Barack Obama, and in addition to that the stimulus program and that together they helped us from going over the cliff, at considerable costs but we didn't go over the cliff.

Now, I think that one of the difficulties is, Ed Rollins was pointing out, is that this was such an omnibus sort of fragmented bill that it didn't have focus in it, and it had a lot of sort of Democratic favorites stuffed into it, and so the result is, it's been very hard to read what the stimulus really did, and they didn't have a captain of the stimulus program to really sort of master this and guide our understanding of it.

And this is in such stark contrast to what Franklin Roosevelt did in the early days of his administration, when he was very focused, and he could take credit in those days, in the spring of his first year he proposed a civilian contravention corps and by that summer, there were 250,000 young men at work in the forests of America and he got all the credit for creating 250,000 jobs. You don't see this. This is so diffused; it is very hard for people to make judgments.

ACHUTHAN: Let's also get the cyclical facts right about FDR, FDR not that you didn't, but FDR puts his hand on the bible in March of '33, and gets sworn in. That is the month that an expansion began. He didn't do anything yet. OK.

GERGEN: Yes, he did.

ACHUTHAN: He had a four-year expansion there, which was at 10 percent annual growth rates when he came into office.

GERGEN: I think that there are economists now who would argue that it's not just the money, it's also the psychology.


GERGEN: And there is no question that FDR changed the psychology of the country.

ACHUTHAN: Psychology, I agree. I totally agree, but policy wise, right? He just started the job.

VELSHI: All right. Let's talk a little bit about how the rest of the world handled the stimulus. Whether somebody did something better than America did. How stimulus has worked not just here and how we're all going to depend on how other countries recover for our own recovery.

Stay with us. We are watching a special, special edition of YOUR MONEY dealing with the stimulus bill, and its effects on you.


VELSHI: We've got a special edition of YOUR MONEY which is following the stimulus money, the effects of the stimulus bill that was passed almost a year ago. We are talking a lot about whether Washington did the right thing, whether it was Congress or the president and what effect it's had. But all over the world, there have been stimulus bills passed, in Germany, France, Canada, Japan, and China.

What have we learned from those efforts to prop up their own economy and the globe economy? Is there anything with we can learn that they did that we might be able to do better? Well better than my good friend Richard Quest to join us now, he is the host of CNN international "Quest means Business." And he joins us. Tell us about what's going on in the rest of the world, what's worked and what hasn't. Richard. RICHARD QUEST, CNN HOST, "QUEST MEANS BUSINESS:" Of all the stimulus packages probably the one that was first out of the gate and gained the most traction early on was, of course, the 580-odd billion that came from the Chinese government, recognizing perhaps earlier than anybody else the importance of getting in quickly, throwing a great deal of money at the problem.

Because their economy, which had been growing in double digits was now really starting to slow down. And even though China never actually looked like it was going to fall into recession in terms of negative GDP, the ability of the Chinese to throw a vast amount of money in their terms at the problem early on really made a huge difference, and the other countries where you can see that, I think, Ali, particularly, if you look down at Australia.

Another country that came in with a two-pronged multiyear stimulus package. Now, it may only have been worth $39 billion in U.S. terms, but the fact it arrived quickly and was targeted is largely credited with Australia skirting far and away the worst.

And one other country, of course, Germany. Germany had to have two bites at the stimuli package game, if you like. The second being 50 billion euros, but once again, it was the ability to target the money where it went fast.

VELSHI: Richard, when you say target what do you mean? Stimulus that causes people to do something specific? Build something specific? Buy something that was manufactured in their country?

QUEST: Yes. Know what it is you're doing and why you're doing it. Don't simply throw everything you possibly can and hope that some will stick on the other end. That's why things like "Cash for Clunkers" worked particularly well. The moment the pork barrel politics comes into it, so it's a bridge in every town, then you're starting to really lose focus, and momentum.

Now to some extent a lot of the money that China did spend was wasted, but even so, we do look at what they went for and same in Germany. They went for infrastructure of railways. They did go for roads. They did go for those sort of things, which not only would have an immediate affect but also would have a legacy. It is inevitable though, that in these hundreds of billions sloshing about, money simply gets wasted.

VELSHI: Yes, and that is another story we're following. Richard Quest, thank you very much. Richard Quest is the host of "Quest means Business" on CNN international. Always a good watch.

Doug Holtz-Eakin, let's talk about that for a second. I saw you nodding your head when Richard was talking, or he was discussing the targeted effect of certain stimulus in certain countries. Tell me what you are thinking?

DOUGLAS HOLTZ-EAKIN, FMR. DIR. CONGRESSIONAL BUDGE OFFICER: I think it's important to look at the bill. I mean have a lot of sympathy to the views expressed that say it was the business cycle and the Fed that deserves the lion's slayer of recovery so far, especially if you look at this bill.

The bill is bigger than the budget at the Pentagon. It is riddled with opportunities for waste, programs going up by 100, 200, and 400 percent. My favorite is broadband which went from $40 million to $8 billion and I don't believe that we have the capacity to get that money out well. And that is what happens.

We've seen a bill that was supposed to have shovel-ready projects, construction unemployment, still falling and it is so large that this trillion dollars of debt that we now have from the bill is another burden for the long term. I think that's the debate we're having. Was it worth it for the trillion dollars?

And the thing I think that's important to recognize about the structure of this bill, one of its great dangers, is that it's built new constituencies for long-term spending. So if we extend everything in the recovery act, we're on to the tab for another $2 trillion in the next ten years and there is going to be great political pressures to do exactly that, and we can't afford that.

So the bill has serious design problem, and I don't think deserves a lot of credit for the recovery and poses some threats for the future.

VELSHI: Jessica.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Ali, it's important though to remember in all of this discussion that this bill also kept people on unemployment when they lost jobs. This bill kept cops on the streets all these months, it kept state and local governments running.

So we can debate whether or not it really kick started the economy and whether the CBOs numbers are right that it grew GDP, but there are people who are functioning today because this bill is there, and so some of this on the politics is just a better sales job that's required, by the Obama administration to remind people what it has done.

VELSHI: All right. Good point. Still want to discuss some of the areas in which we could be more targeted, particularly with the rest of the money that we're using. One of the questions that we get a lot here at CNN, is how does a share of that $787 billion stimulus get from Washington to your hometown?

So when I come back, we're going to head back over to our magic wall to show you exactly how the stimulus money is being used to create in one instance up to 550 jobs in Holland, Michigan. That's coming up next.


VELSHI: I have talked with people across the country and the stimulus question I get most often is, how do I get my share of the $787 billion? How do stimulus dollars end up in my town or in my company? Let's follow the money from Washington to your hometown; in this case we are using Holland, Michigan as an example.

Now, let's start in Washington. This is the $787 billion that the, that came from the Recovery Act. Now, of the $787 billion, it was divided up into different departments, and the Department of Energy got $36.7 billion.

Now, the Department of Energy has many different projects for that $36.7 billion, but one of them is the $2.4 billion it allocated to Advance Battery Grant Program. Batteries are batteries for hybrid or electric cars that still need some technological advancement, so this money was going to be used to advance that.

It was meant to go to private companies across the country, who applied for parts of this $2.4 billion. Now, one of the companies that got a pile of money was Johnson Controls, which is an automotive part manufacturer, and they got $300 million of the $2.4 billion, which is part of the $36.7 billion the Department of Energy got, which is ultimately part of the $787 billion.

Now follow me all the way to Holland, Michigan where Johnson Controls actually has a factory that's been boarded up. It's been closed more than three years. Now, with the $300 million in stimulus grant money, Johnson Controls is now opening up that factory.

They're taking the shutters off it and they are going to make lithium ion batteries for plug-in hybrid cars. This factory alone could employ up to 500 people directly, and they started hiring. Now on top of that Johnson Controls said it might hire other staff.

So there are indirect benefits. They might hire janitorial staff, workers for the facility's cafeteria. With 550 new people, those are all people who would be shopping in the area, and that might help the local pizzeria or the dry cleaner or a teacher get a job at the school because there are more students around. That's how the stimulus program should work, if it be all worked well.

Douglas Holtz-Eakin, this is an ideal example of how money goes from Washington to a community, creates jobs, and plays out across the country. I guess the problem is, the ideal is not what has happened all over the country?

HOLTZ-EAKIN: Well, and this is why you can't say this stimulus had no impact. I don't think anyone wants to say that, but I think you need to recognize that you just laid out not just the chain of how the money got to Holland but the chain of political influence that is now permanently set in place to both keep that money going to Holland whether it merits it or not and to make it much more difficult to have money allocated to the best uses in our economy.

VELSHI: I'm going to stop you. Tell me what that means? Because why do you think that example doesn't get the money, is not the best use of the money?

HOLTZ-EAKIN: So what happens now in two years? Are we forever going to be putting $300 million out to Johnson Controls? Why is that fair to their competitors? Is that something that we genuinely need in the economy, given how Americans want to spend their money, that's what should drive business decisions not what the Department of Energy wants to do with taxpayers' money based on political influence.

We have built an enormous artillery to make politics more important, genuine business decisions less important and our economy perform less well over the long term.

VELSHI: Donna, what do you think of that?

BRAZILE: Well first of all I think we're using public money for the private good that we're investing in new industries that we are trying to reinvent our economy in places where we know the manufacturing sector has had a hard time keeping up with the jobs demand. I want to echo something that Jessica said earlier, and that is, in terms of the impact with the stimulus that more than 6 million Americans were essentially saved from the poverty lines last year.

This program has saved more than 33 million Americans from even going into poverty. So I think we need to look at the overall affects and not just the politics of what industries may have received money, or what politics went into the designing this program that ultimately I think will help with our recovery efforts.

FREELAND: I was going to say Ali that if I were Robert Gibbs I would be throwing things at my TV right now. Because I think this is a very worrying example of the overall worthy stimulus. You have $300 million for let's round it up 600 jobs. Let's do the math. That's half a million dollars per job. I can probably get more than one job out of half a million dollars. All of us could, in our businesses. Right. Even fancy TV stars ...

ACHUTHAN: The bigger problem ...

ROGERS: It is a much bigger problem.

You have to be very careful though with that. What I liked about what you did over on the wall was you walked us through the multiplier affects. You walked us through how there's this chain of causation that leads us to where I think you're going to be overestimating the effect and the other thing too ...

FREELAND: That argument for actually just spending the money, say, on teachers. Right, that would be for half a million, you can get a lot of teachers.

ACHUTHAN: There is a much bigger issue that is being blown off and it has to be said. There is a long-term problem for over half a century now, since World War II, the pace of our expansion, every time we come out of a recession has been getting weaker and weaker and weaker.

The last expansion was the weakest on record. That is another way of saying our altitude is falling. That is a fact. I'm not going to argue why. I'm just saying its happening. You can go look it up.

ROLLINS: The argument that I am concerned about, the argument I'm concerned about, China's a dictatorship they can do what ever they want.

VELSHI: So by definition their stimulus will be more effective than ours?

ROLLINS: It was their $500 billion. We had to go borrow ours trillion dollars to pay, to stimulate our economy, in which there are longer term effects. I totally agree that this thing has become so political; it's not about good economic stimulus policy. Much of what this became is a welfare entitlement program.

And I'm not saying that people in tough times shouldn't be taken care of, but at the end of the day, this is not basically creating a stimulus that's going to take long-term effects. And I think every time we spend money from here on out, we have to be very careful about the next generation that is going to have to pay for this with very, very significant burdens.

FREELAND: Ed is talking about the debt of the deficit, is absolutely right and that is going to be, you know the big political challenge for this year is going to be on the one hand 10 percent unemployment, elections coming up. On the other hand, pressure on the U.S. dollar. Pressure on government spending, and reconciling those two things, and so did the Chinese who are lending Americans money.

ROGERS: We have other data points out there too out there too. You have the experience in Canada, you have experience in the United Kingdom, and you have experience in Japan. Again, if we want to be evidence-based, you have to go back to what Ed said, the economics does, again, looks like -- there's good ...

FREELAND: A lot of those countries don't have the same deficit problem.

VELSHI: Hold that for after the break. Critics point out that America has lost millions of jobs since the stimulus was signed into law. Stimulus proponents say we would have lost millions more if we hadn't done it. That is part of the argument here, you're hearing with my panel. How exactly do we measure the specific success of this $787 billion program, when we come back?


VELSHI: We are talking about the stimulus bill, $787 billion bill that was passed a year ago, and we are talking about the affects of it, what's worked and how it hasn't worked in some people's opinions in a very special edition here of YOUR MONEY.

Now one of the things that we want to drill down on, it's come up a few times during the course of this show is how do you measure the success of this bill? Do you measure it politically? Do you measure it by the number of jobs created? Do you hold the administration to the targets that they actually put out there? I want to start with Ed Rollins, because it's not even clear, before you can say whether this was a success or a failure what we're measuring it against.

ROLLINS: That is the bottom line, there's nothing to measure it against. Nobody knows how many jobs and every time they get up there they say different figures. What you can measure it against though after spending nearly a trillion dollars counting interest, a year later 50 percent of the country basically today said the economy, creating jobs is still the number one priority. So by the political standard, it still has not basically moved that needle, which is a very important needle.

VELSHI: Lakshman, I want to go back to the point you made earlier and that is that when measuring the stimulus is only effective on the margin. In other words, how do you, let's say we created x number of jobs. The administration said we did. Ed points out; it's very difficult to even say that. How do you know how many would have been lost or created without stimulus?

ACHUTHAN: You don't, but you do know, I think if you step back, that the business cycle kind of overwhelms everything. And the fact that the economy bottomed at the end of the year, the beginning of the year, looking at leading indicators, you saw that was baked in the cake already, and then you have less and less job losses and now we have jobs growth.

We're going to be there and near term we are going to have actually quite good jobs growth. I think you'll look back and see that we're entering a period of pretty good jobs growth, but the thing about the process ...

FREELAND: Shorts ...

ACHUTHAN: I said near term, but the thing is, is think about it. Why do you hire someone? You don't hire someone because someone gave you a bunch of money. You don't even hire somebody if you're profitable. You hire someone, because the demand is there. And that is the ultimate reason. You can hand me a hunk's money and I'll say thanks. I'll put it in the bank. I'm not hiring someone ...

FREELAND: Some of these jobs were government jobs.

ACHUTHAN: That's demand. The government is buying a bridge.

FREELAND: It was actually about firing positions. Did they fire school teachers or not?

ACHUTHAN: Look, local and state finances in supporting that very important. Also, infrastructure jobs, where you build a bridge, that is demand right there.

ROGERS: The overwhelming number of jobs that were created off this $787 billion as estimated in the recent economic advisers report and it is consistent with some of the stuff I did were in the private sector. A small silverware in the government. The other aspect here is how do you measure, you've got six studies, not just the council of economic advisers but you have some private sector forecasters.

In particular, Mark Zandi, he was adviser during the McCain campaign. He actually has been very, very, done a lot of research here and has found his numbers are similar to the 2 million range also in terms of jock creation. But the big important thing is how do you identify the effect is you have to look at the timing.

Match the timing of when the flow of funds really moved into the economy, and then match it or link it up to payroll employment and I think, the hard part people are having difficulty with is also there is creating jobs. Well, again, the trend was job loss. So I think people have to really work harder to wrap their head around the notion that you're creating jobs to stem the job loss.

ACHUTHAN: Hang on. You can see the business cycle at work. Because the first $150 billion came out and sank like a stone. You didn't get any jobs, you lost millions, OK. The second one comes out and you are getting jobs, you were going towards jobs growth because it's layered on a nice timing with the business cycle.

FREELAND: It is also layered on the recovery of the financial sector.

VELSHI: Let's go to D.C. Donna, what do you think?

BRAZILE: A large chunk of this money went to tax cuts to the American people. The congressional budget office estimated that in the third quarter, it created anywhere between 600,000 to $1.6 million and they are projecting that in the fourth quarter, that we will see enormous job growth. So we've seen job growth. The question is, can we sustain job growth over the long term.


HOLTZ-EAKIN: That is an important point. We haven't seen job growth. What you get out of the White House, what you get out of the Congressional Budget Office, what you get out of Mark Zandi, all people that I've worked with, are estimates out of models. Not estimates out of the reality on the ground. But exercises in computer programming where you get out what you put in. And all of those models should be viewed with a great deal of skepticism.

ACHUTHAN: Well you have jobs.

HOLTZ-EAKIN: You look on the ground, when you look on the ground I think you have to, in the interests of good science recognize the business cycle and not pretend that the economy was going to continue to drop 6 percent every quarter.

VELSHI: So this is interesting.

HOLTZ-EAKIN: And then go forward, so I've done calculations that say, well suppose the economy had continued to drop at a 6 percent annual rate? Or maybe it would have bottomed out and gone flat. If you attribute all the GDP growth in that world to the stimulus package, you don't get multiplier effects of two to one, three to one like you hear out of the claims. You get something that is one for one or less. It's an inefficient package. It doesn't do zero but it doesn't spend our money well.

VELSHI: All right. Doug, hold on to that point. Everybody else hold on. Because now we're getting to the crux of the matter here. If this thing was here too create jobs, how do we measure whether it created jobs? Are we actually on track to create jobs? That's what we think is happening. We think that we're gaining jobs every month in the United States. Is that going to be true? Is that going to hold true for the next few months?

Stay with us. We're coming back with a special edition of YOUR MONEY and we are going to talk about whether you can expect to have a job or a better salary in 2010.


VELSHI: As I toured the country throughout 2009 above the CNN Express, obviously, a number of Americans are still searching for evidence of an economic recovery in their lives. Was this $787 billion stimulus bill the answer and when and how will we know?

Let's return to our discussion and to Doug Holtz-Eakin in Washington, D.C. Doug, we just had a fantastic discussion about the economics of how you measure. How you economically measure whether or not there has been job creation. Give this to me in an entirely lay person's terms. Are we in 2010 in the months going forward, are we going to have seen jobs created? And is that because of the stimulus?

HOLTZ-EAKIN: I believe we will see the economy recover and we will see jobs created in 2010 by mid to late 2010, we're going to see a couple hundred thousand jobs a month, it will finally be enough to push the unemployment rate down and all of that is good news, although long overdue.

I don't think you get to place a lot of credit on the stimulus package, there is the business cycle, the enormous efforts of the Federal Reserve, and I think if you just think about our economy and its weaknesses, the real problems are a household sector that is heavily indebted and lost a lot of its wealth.

There is nothing about a stimulus package that recreates that. There is nothing that you can do. We're going to climb out of this slowly but, in the end, we'll get a recovery that the American people will begin to see the light at the end of the tunnel.

VELSHI: Bill Rogers, you were the chief economist for the Department of Labor and you understand this stuff and you have studied the jobs. Do you agree with Doug? Do you think we will start to see jobs created in 2010 on a sustained basis, month after month, and do you think you can attribute the success of that to stimulus?

ROGERS: Two parts to your question. First part, yes, I believe we will start to see significant job growth by the middle of the year. Second part of your question, I still do believe again if we lose some evidence based research, that we are seeing that you can attribute the job creation that we're going to merge or see to the stimulus.

And you're starting to see it right -- we've been seeing it right now. We're going to have some new reports at the end of this month on that will again give us a few more data points to make this assessment. VELSHI: Lakshman I'm not sure where you stand between these two guys. Because Doug and you were talking about the business cycle and saying everything outside the business cycle meaning the normal course of events that fact that winter comes every year and spring comes after it is more important than anything or anybody else does.

ACHUTHAN: I do think the business cycle is more important than all of this that we've been talking about. I'm not saying the stimulus is insignificant it has made an impact here, there is confidence and there are things on state, there are things with infrastructure jobs that it has done very measurably. Having said all of that, I'm more optimistic, I think, than most people have talked so far in terms of the strength of this recovery.

This recovery is stronger than the last two recoveries both in terms of GDP which is obvious all ready and in terms of jobs which is not so obvious. The last recovery it took 21 months before you had positive jobs growth. We are going to have positive jobs growth, you already have that little peak of it in November but you're going to have it right around here. These numbers are going to be revised up.

Already the nonmanufacturing part of this economy, 9 out of 10 of us work there is creating tens of thousands of job over the last couple of months. So the recovery in jobs is here. It will happen sooner than you think. My concern is that it won't last long enough to recover what we lost during this recession, because we're not going to have a very long expansion.

VELSHI: That is the perfect place for us to stop for a moment and come back with the discussion that Doug asked about what happens after the world of stimulus. We have lived in this world for almost a year. We will be in it for a little bit longer but we are a free market economy or we were before we got into this so what will that look like? How do you benefit from it? How do you capitalize on that? Where do you go in this post-stimulus world?

When we come back on this special edition of YOUR MONEY.


VELSHI: A lot of discussion about the stimulus bill and its effects over this hour. Now we have time for 15 seconds from each of our guests about what the post-stimulus world looks like. What do we have to look forward to, Doug?

HOLTZ-EAKIN: I think this is more important than stimulus work. We have two great issues of fairness, will we leave behind the next generation enormous debt and the cost of paying for it and an economy that doesn't perform as well as one we inherited and will we have a world where political influence, one struggling community gets help and another does not, one company gets money from the government and another does not, instead of allocating things on the basis of effort, work and merit.

VELSHI: Donna. BRAZILE: Job creation ultimately depends on the real job creators and that is small businesses across the country. That's why the administration is right to focus on increasing the amount of capital that's available to small businesses so they can go out and hire new workers. That is the key to future job growth in this country.

VELSHI: Bill Rogers.

ROGERS: I think that the stimulus and its totality will help to reduce some of the long-term scarring that recessions have, in terms of the length of time out of employment, drops in income. It will have placed or allowed households to get their balance sheets back in order so the private sector can really propel us forward and it is a good example of what the old Fram oil filter said, that auto tech said that you can pay me now or you can pay me later.

ACHUTHAN: Look we're going to have a good year. This economy is going to continue to get better and jobs are going to come sooner than you think and that is the very good news. The bad news is beyond that, regardless of the stimulus and quite separate from it, we are going to have more frequent recessions so you have to step back from all of this and say how am I going to navigate it? I think good objecting leading indexes can protect you.

VELSHI: Chrystia.

FREELAND: Until November, the focus is going to be jobs, jobs, jobs, and because the only thing the White House is worried about now is that vote. After November, the focus for the White House and the focus for all of us as individuals is going to be living within your means. That is what America was not doing prior to 2007 and that is what America is going to have to start doing.

VELSHI: Ed Rollins.

ROLLINS: The impact of the taxes that are going to come and the spending programs the Democrats want to obviously still push forward and what that does to small businesses is going to have more to do with this than anything else.

VELSHI: You're agreeing with Donna on that.

Jessica Yellin.

YELLIN: We will see Washington pivot to focus heavily on deficit reduction and keeping our balance books, check book in check. Republicans tried to erase the memory of George Bush spending and holding Democrats feet to the fire and Democrats appointing a deficit reduction commission and saying they are committed to this.

VELSHI: Deficit is going to be a big thing that we discuss in 2010. Thank you to all of you. What a fantastic panel and a hardy discussion. Thanks for joining us for our special edition of YOUR MONEY. The stimulus project will continue all this week on CNN, starting each day with "American Morning." You can catch me all this week from 1:00 to 3:00 p.m. Eastern in CNN's "NEWSROOM." YOUR MONEY is back next week, Saturday at 1:00 p.m. Eastern and Sunday at three. Have a great weekend.