Grading the Stimulus: Too Early to Tell or Stop Spending?
Assessments President Obama’s seven month old $787 billion economic stimulus package are now being proffered by think tanks who say it is too soon to make a determination and detractors noting tha ongoing job losses.
The stimulus “has failed to halt the steady loss of jobs or pull the economy out of recession,” writes Stephen Keen and J.D. Foster of the conservative leaning Heritage Foundation.
The pair also notes that 64 percent of the fiscal deficit can be attributed directly to the stimulus and other programs meant to prevent a deeper and more costly recession.
Meanwhile, another commentator says it is “probably impossible” to prove if the stimulus is or is not having a big effect at this time.
William Gale, a director at the Brookings Institute looks toward economic indicators which he says suggest that there is a positive effect due to the stimulus.
He noted higher consumer spending in the spring of 2009 despite a falling stock market at the time, rising state and local purchases in the second quarter, more federal purchases. He says the Obama Administration’s policy to support the economy may have created an “expectational effect” that could have led to more investment. He also cited forecasting models from Goldman Sachs and Macro Advisers who saw a 2 or 3 percent increase in growth, in line with White House estimates.
Gale also cited a White House report on the stimulus issued two weeks ago found that “countries that adopted larger fiscal stimulus packages have outperformed expectations relative to those adopting smaller packages.”
While Keen and Foster advocate repealing the stimulus’ spending components in order to keep the government’s budget deficit smaller, Gale believes waiting for more data will allow more tests of the stimulus and help bring about a consensus about the effect of the legislation.
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