On this day in economic and financial history ...
On Feb. 17, 2009, after weeks of fevered negotiations following the inauguration of President Obama, the American Recovery and Reinvestment Act -- most commonly known as the stimulus -- was signed into law in Denver. The stimulus proposed to inject hundreds of billions of dollars into the flailing American economy through a combination of increased government spending and tax cuts, in an effort to halt a months-long slide into recession before it became another Great Depression. Originally slated to cost $787 billion, the stimulus' impact on the deficit is now thought to total $831 billion. Four years after it became law, the stimulus has provided $291 billion in tax breaks, $250 billion in project and operational funding, and $244 billion in entitlement benefits.
Has all this funding worked? Less than a month later, the Dow Jones Industrial Average (DJINDICES:^DJI) bottomed out and had more than doubled from its crisis lows within four years of the stimulus' passage. The Congressional Budget Office found that the stimulus added as many as 2.1 million jobs in the fourth quarter of 2009, increasing the nation's economic output by 3.5% and lowering the unemployment rate by as much as 2.1%. Time correspondent Michael Grunwald, author of The New New Deal, pointed out to The Washington Post's Ezra Klein:
We dropped 8.9% of GDP in Q4 2008. We lost 800,000 jobs in January 2009. We passed the stimulus. And then the next quarter we saw the biggest jobs improvement in 30 years. ... It's got the biggest middle-class tax cuts since the Reagan era. It prevented 7 million people from falling behind the poverty line.
On the other hand, a pair of working papers from the conservative Mercatus Center at George Mason University claim that the stimulus distorted normal market incentives. For example, some contractors were forced to use costlier materials to make it appear that a larger amount of stimulus money was being put to use, or funding might have been directed toward the purchase of useless tools instead of for the retention of employees. There are bound to be some flaws in even the most well-intentioned programs.
The tech index heats up
On Feb. 17, 2000, the Nasdaq Composite (NASDAQINDEX:^IXIC) raced toward its ultimate dot-com apex, closing above 4,500 points for the first time in its history. That day, the index finished with a 2.7% gain to close at 4,549, with a then-record 2 billion shares traded on the Nasdaq exchange. It had taken the Nasdaq a year to grow from 2,500 points to 4,500, and only four and a half years to grow from 1,000 to its Feb. 17 close.
However, the cracks were already beginning to show in this booming market. The Dow had peaked a month earlier. On Feb. 17, it sagged under the weight of another warning from Federal Reserve Chairman Alan Greenspan, who told the House Banking Committee that "profoundly beneficial forces driving the American economy to competitive excellence are also engendering a set of imbalances that, unless contained, threaten our continuing prosperity." At the close, the Dow was already 10% lower than its January peak. In less than a month, the Nasdaq would hit its all-time high, a level of just over 5,000 points that has been far out of reach ever since.
Whose wireless is it, anyway?
On Feb. 17, 2004, the U.S. wireless landscape shifted under Verizon's feet when Cingular Wireless agreed to acquire AT&T (NYSE:T) Wireless for $41 billion. This vaulted the new Cingular into the lead for American market share, ahead of Verizon and the 46 million subscribers it served at the time.
The Cingular deal brought weeks of fierce buyout jousting to a close, cutting off Britain's Vodafone and its potential $38 billion bid. Either option was likely to have brought regulatory scrutiny, as Vodafone was (and remains) the 45% owner of Verizon Wireless, with Verizon itself owning the rest. However, it was Cingular, then jointly owned by SBC Communications and BellSouth, that posed greater regulatory risk -- although this risk turned out to be overstated, as the deal went through without a hitch.
The deal also brought greater security to the faltering AT&T Wireless, which had endured higher levels of customer defections than its competitors following the creation cell-phone portability regulations, which allowed users to retain their numbers when they switched services. AT&T Wireless' independent status also put it at a disadvantage against Cingular and Verizon, both of which could reach into the deep pockets of their telecom parents.
Today, Cingular is known as AT&T Wireless. It is now a wholly owned subsidiary of the new AT&T, after SBC's acquisition of the original AT&T a year later, and its acquisition of BellSouth at the end of 2006. Since its merger, AT&T Wireless has consistently remained atop the U.S. market. At the end of 2012, it served 107 million subscribers to Verizon's 98.2 million subscribers.
Start me up
The first working electrical automobile starter was installed in a Cadillac on Feb. 17, 1911. This device, invented by Charles Kettering, is something drivers around the world today take for granted, but it was revolutionary at the time.
The autos built in those days came with crank starters, which could pose a real physical danger to their users. Cadillac founder Henry Leland knew of this danger firsthand, as he'd lost his good friend to a tragic crank-starting accident. Leland's friend, Byron Carter, had suffered a broken arm and jaw while helping a woman crank her car. The crank-starter had gone haywire when the car sputtered to life, tearing the mechanism violently from his hands. Carter suffered complications from his injuries and died when his weakened immune system succumbed to pneumonia. Unfortunately, this was not an isolated problem with early automobiles.
Kettering was then primarily known as a brilliant researcher for National Cash Register (NYSE:NCR). In his five years with the company, he'd eliminated hand-cranking mechanisms for cash register operation and had also created the earliest receipt-printing registers as well as the earliest systems of remote credit charging. This sparkling resume brought him to Leland's attention, and he first began work on an electrical ignition system for Cadillac in 1908. Carter's death in 1910 refocused Leland's and Kettering's energies on the electrical starter, which was completed rather quickly for such an important advancement.
The success of this electrical starter prompted Kettering to found Delco, which was soon absorbed by eventual Cadillac parent General Motors. Kettering became the vice president of GM's research subsidiary in 1920 and held the position for the next 27 years. Kettering's groundbreaking work on electrical ignitions and starters has made starting your car as easy and harmless as turning a key -- or, in today's newest cars, pressing a button.
A record-breaking Bug
On Feb. 17, 1972, the 15,007,034th Volkswagen Beetle rolled off its assembly line. That number set a new record for auto production that had been held by Ford's (NYSE:F) Model T since 1927. Like the Model T, the Beetle was a symbol of inexpensive reliability, freedom on four wheels for the masses. Also like the Model T, the Beetle became an iconic symbol of its era, the Everycar for the times that were a-changin', as Bob Dylan had so eloquently put it. While the Beetle could never hope to match the Model T's ubiquity (the vast majority of cars in the 1910s were Ford models), it's survived in the public consciousness even longer. You might even see an original Beetle motoring down the highway every now and then, more than 50 years after they became popular.
The Model T's production totals were eventually revised upwards to the 16.5 million range, but Volkswagen kept cranking out the stubby, stout original-model Beetles until 2003, with a final production total of 21.5 million cars. That makes the Beetle, which was first built in 1938, the longest-running and most-manufactured single vehicle design in automotive history.