Monday, July 5, 2010

Recovery Act

A sobering analysis of the U.S. stimulus package:

Is the Recovery Act helping the economy? - CNN

« The job market and economy need a serious jumpstart, but the stimulus program likely won't be able to do it.This summer will be the peak of the $787 billion stimulus program in terms of creating jobs and pumping money into the economy.

After that, it will be a downhill slide for stimulus even as the economy is expected to continue sputtering.

"It's very hard to discern any impact," said Brian Bethune, chief U.S. financial economist for IHS Global Insight.

...Some 57% of tax benefits and 60% of entitlement money has already been paid out, according to federal data.

The White House credits the stimulus program with funding between 2.2 million and 2.8 million jobs so far. That figure is derived from a mathematical formula based on the money that's flowed out the door. Officials say at least 3.5 million jobs will be created or retained by year's end, which was the president's original goal.

But it's nearly impossible to know how many people actually owe their employment to stimulus. Recipients of Recovery Act contracts reported that 682,370 jobs were funded in by stimulus in the first quarter, but that figure isn't cumulative and covers only a portion of the total stimulus package.

Bethune, however, says that the government's projections are overly optimistic. Though he agrees that the Recovery Act has juiced the economy, he feels it's closer to a 1 percentage point increase in the gross domestic product in the first quarter, rather than that 2.5 to 2.9 percentage point hike estimated by the White House's Council of Economic Advisers.

"Just look at the number of jobs we created over the past four quarters," he said. "There haven't been a lot."

Unemployment slid to 9.5% in June even as 125,000 jobs were lost. The vast majority of those losses, however, were temporary Census workers. Private sector employers added 83,000 positions.

There are several factors hampering the Recovery Act, experts said. A primary one is that states' budgets are in such bad shape that they continue to shed jobs and slash spending despite stimulus infusions.

Also, contractors have to jump through many government hoops to get stimulus funding, said John Slye, principal analyst at Input, a market research firm for government contractors. That's one reason why a relatively small percentage of project funding has been distributed.

"It's taking agencies so long to get this money out into the economy," he said. »

Dear American economy, please get your act together.