Reviving the Economy: Signs of Stimulus?-Economic Impact
Monday, May 25, 2009SUSIE GHARIB: So as we approach the 100 day milestone of President Obama's stimulus package, has it made any impact on the economy? Suzanne Pratt takes a look.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Since President Obama signed his mammoth economic stimulus package into law in February, most Americans have started to feel its presence. Thanks to the plan, your paycheck is likely plumper because of tax cuts implemented this spring. If you're on Social Security, you've probably already received a one-time $250 payment. It's also courtesy of the president's plan. So is the extra $25 in unemployment benefits coming to laid-off Americans, as well as the 65 percent cut in the cost of COBRA health insurance. The primary goal of the president's fiscal stimulus plan is to stop the economy's free fall by creating a new source of demand. JPMorgan economist, Bruce Kasman, says it's unclear so far whether that's happening.
BRUCE KASMAN, CHIEF ECONOMIST, JP MORGAN: I think it's too hard to trace the numbers and it's too early, in terms of seeing the overall impact. I think we will have to wait until to see both what the consumer sentiment does as well as the consumer spending does over the next three to six months before we can draw any good judgments about how the overall impact of the policy stimulus has been working.
PRATT: Economist Mark Zandi believes the stimulus package is starting to work. In particular, he sees signs the extra cash in peoples' pockets is being spent in the retail sector.
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: There's a lot of things going on. It could be timing of Easter that's playing a roll, weather of course. But, it feels like the stimulus money is having an impact. PRATT: The stimulus money is also supposed to keep the labor market off life support. The White House says the billions of dollars in funds promised so far to programs and projects is already helping. It claims 150,000 jobs have been created or saved in the last few months and is sticking with the forecast of three and a half million by late next year. But some experts question whether any progress has been made on the jobs front. While weekly unemployment claims have firmed, the April employment report was disappointing. Dean Baker, co-director of the Center for Policy Research says it's simply too early to expect much.
DEAN BAKER, CO-DIRECTOR, CENTER FOR ECONOMIC POLICY RESEARCH: If the stimulus is having a positive effect basically it will be seen two, three, four months out from now where the rate of job loss begins to slow. But, what I have to say is that the stimulus, as helpful as it is, is simply not large enough.
PRATT: Economist Brian Fabrri adds, the president's plan is really about preserving jobs not creating new ones.
BRIAN FABBRI, CHIEF ECONOMIST, BNP PARIBAS: A lot of the stimulus package is a transfer payment from the Federal government to state and local governments so that the state and local governments that are deeply embedded in deficits in their own state and local budgets won't have to fire teachers and firemen and policemen.
PRATT: Most economists also want to talk about the less measurable effect of the stimulus plan and that's the psychological impact. Many Americans now feel better about the future because they see government taking action to stabilize the economy.
ZANDI: The policy response is more than the dollars and cents. It's really how it makes people feel because, at the end of the day, unless people feel better, nothing is going to turn this economy around.
PRATT: Most economists expect the stimulus plan will do a lot more to boost economic activity this fall. But, others say there's so much downward momentum, the plan will not be enough to turn things around. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
