There is a certain argument used by boosters of last year's stimulus package that urges would-be critics on the left not to miss the forest for the trees. The forest, they argue, looks pretty good: $54 billion in a State Fiscal Stabilization Fund has so far created or saved 325,000 education jobs, increased federal funding for Medicaid, prevented cuts to health services, and safety-net provisions are keeping millions out of poverty.
Beyond these effects that ordinary Americans can actually sense, the economy seems -- for now -- to be brightening. Or at least that's the current economic consensus. In any case, the new unemployment numbers, which will be released Friday, will almost certainly show continued improvement.
So the benefits of the stimulus are manifest, certainly when viewed relative to what American households would have experienced without it. But in their fervor to support an example of good government spending, many overzealous supporters have ceded control over the term "recovery" to, well, economists. As GDP growth remains positive, use of the technical label "recession" fades, and stories like this one come to dominate the news, the stimulus's flaws -- its several rotten trees -- will fade, thankfully for some, from view.
However, it is clear that "economic recovery" of the type these stimulus boosters broadcast at best is limited and at worst means that certain sectors will begin their recuperation from the downturn from a lower point than the rest of the country. Indeed, over the next several years, as has been well documented, state governments will face budget deficits of several hundred billion dollars that will force them to cut services and delay infrastructure projects. While some states will be less affected than others -- 11 states are not currently facing deficits -- places like California (an exception for the severity of its crisis, not for its sort), which constitutes something like an eighth of the economy, will lag and drag the entire economy down.
The health of cities and their surrounding metropolitan areas constitutes a similar concern. Surveys of city officials suggest that the next three years will be particularly difficult for the country's urban areas, with one concluding that "the nation's cities will most likely still be realizing the effects of the current downturn in 2010, 2011 and beyond." About a third of metros currently have unemployment rates above the national average and those with the highest rates (15 percent and above) are concentrated in California and Michigan. The economic health of particular communities within cities is in a similarly precarious position: the unemployment rate for black men in New York City is 19.9 percent, perilously close to double the national average, and in one neighborhood approaches an astounding 50 percent.
Pointing out that the stimulus package did not solve these problems is no knock on the efforts of President Obama or even on the efforts of Congress to address the economic crisis. Rather, it is an attempt to remind that no matter how many times people are told that a stimulus package is designed to increase aggregate demand and so spur economic activity, they will still expect it to bring about recovery. Surely it is paramount for supporters of stimulus to have a good idea of what most people consider recovery to be.