Is the stimulus working?

The answer to the question is the stimulus working depends on whom you ask. A Republican, a Democrat, a Wall Street analyst, an economist, someone with a job or someone out of work. For a reasonably objective answer economists are the best source, provided they’re not biased toward one of the political parties.

Unfortunately, the credible economists who have spoken this month use words like ‘maybe’, ‘it appears’ ‘it’s too soon know’, ‘could’, and ‘might’. The only unambiguous answers come from those economists who are aligned with political parties; their answers are adamantly yes! or no!, depending the political party they favor. Only a die hard Democrat or Republican would accept one of these extreme views.

What we all do know is unemployment is at a 26 year high and the latest figures show it continues to rise. In Lagrange it’s not rising, it’s

skyrocketing! Economist Richard Clarida has said, “Credit is limited, plus rising unemployment and a general resistance to spend are dampening consumer demand. Many households that want to borrow can’t, and many that can borrow won’t.” Without spending there can be no recovery.

Others point out the stimulus to promote car sales and home buying has failed. The housing tax credit applied to only a fraction of first-time buyers while unemployment has caused ever-increasing numbers of foreclosures. Economist Mark Vitner states “There are no signs that we have the makings of a recovery like we saw in the early 1980s” He predicts mortgage delinquencies and foreclosures won’t return to normal levels for three more years. The car tax break still required federal tax deductions for state sales and excise taxes on vehicle purchases; as a result the effects have been trivial. The “cash for clunkers” tax credit is popular with car owners and dealers. Ford sales up, how much of the increase is to due to “cash for clunkers’ has not been released.

We all know that in February, Obama promised funds would be paid out quickly and save or create 750,000 jobs by early August. The Obama administration now estimates that the stimulus package helped to create or save 150,000 jobs in the administration’s first 100 days, and will save or create 500,000 in its second hundred days, ending in early August. However, there is no firm evidence of how many jobs have been created or saved. If Obama’s is right, that’s 650,000 jobs; however during this time over 2 million jobs were lost. Another problem with Obama’s numbers is they include “jobs saved”. When businesses planned to lay someone off, but decided not to, there is no way to accurately count those decisions or to know if it was the stimulus bill, or some other factor caused the employers to change their minds. We should be given a figure counting only jobs created.

Polls show Americans believe 80 to 90 percent of the stimulus money should go to job creation. The best estimate is that 19 percent is allocated for that purpose. So the question ‘is the stimulus working’, given the facts we know, it’s impossible to say with any certainty. However, the most optimistic economists and Obama himself say if it is going to work we won’t know for sure until next year.

Which leaves me remembering the annual prediction of the Atlanta Braves when they were in Boston and finished another dismal season, “Wait till next year”. And the next year they would be worse.