With all of the talk about the efficacy of the enormous, $787 billion stimulus package, the more important question has escaped public focus. The broader question, raised by many economists, is whether any fiscal measure applied will actually drag the U.S. economy out of the current recession.
Both credit and consumer demand has remained very low amid the rising unemployment rates and the growth of personal savings. The problem, particularly with job loss, is just too large, even for the federal government to handle in any effective manner.
The plan passed by in February has gone largely according to plan so there were no surprises. Still, they won’t even begin to scratch the surface of the economy’s main issues, such as dropping values of assets like stocks and homes. As it stands, the plan has released approximately $60 billion in funds and $43 billion in tax relief. This only accounts for about 13% of the plans total budget.
This has made for some cloudy outlooks for many companies across the spectrum of industries. Those who support the stimulus have still insist that if there had been no fiscal response the economic situation and any prospects for recovery would have been grim.
“It’s working, it’s demonstrably working,” said Jared Bernstein, chief economic adviser to Vice President Joseph Biden, whose office is overseeing the stimulus rollout.
While it is unlikely that there will be subsequent stimulus package, advocates of such measures make the case that it is the modest performance of the first one that may necessitate the need for another.
Factors like rising unemployment and more frugally minded consumers have both contributed to lower returns for every stimulus dollar spent. It just isn’t enough to impact the affected areas with sufficient strength.
According to Treasury Secretary Geithner, the measure needs more time to work and is appealing for more patience from the American people. Geithner has said in numerous interviews that the package was designed expressly to work out over a two-year period, leaving the bigger effects on investment for later this year. He has called for postponement of any additional fiscal initiatives.
Tags: tax relief, stimulus plan, obama
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