Several guests on CNBC’s Squawk Box have made the claim that the stimulus has failed. I found these remarks to be largely political in nature and some, including Representatives Ryan (R-WI) and Cantor (R-VA) have actually asserted that the stimulus be pulled, a move I feel would be reckless as in the 1930’s in the US and 1990’s in Japan such action resulted in a second leg down in the economy (I would not think it wise to challenge that history without sound reasoning being provided). Some economists, such as Paul Krugman (and most of the economic panel presenting on CBS’s Face the Nation on September 5, 2010) feel that the stimulus actually should have been larger and could support additional ‘targeted’ stimulus. In that vein, it is regrettable that the jobs end of the stimulus legislation was negotiated down by the Republicans in the Senate during debate and still not one House Republican voted for the negotiated legislation. (It is difficult to see how this was not simply a tactic to weaken the legislation for political purposes). Additionally, I find the claims that the stimulus has failed to be inconsistent with the opinion of both liberal and conservative economists who feel that we would have been worse off without it.
In the letter to Squawk Box below I provide several economic indicators published on the Bloomberg web site (New Jobless Claims, Real Personal Expenditures, ADP/private sector payroll, and ISM Manufacturing Index) all of which showed improvement following passage of the Stimulus legislation. Although much attention is being given to the employment situation (and despite the improvement we have seen we do need to be examining ways to increase employment), several guests on Squawk Box (and as reported by CNNMoney) have stated that we are experiencing the strongest jobs recovery in decades, faster than either of the past two recessions. The difference this time is that we have lost a much larger number of jobs in the greatest downturn since the Great Depression and that will take additional time to bring the jobless percentage back down. We need solutions, not just naysayers, and I point out that the political climate is hurting the recovery. My concern about the soundbite naysayers is the potential for a self-fulfilling prophecy. Our economy and our markets are greatly affected by psychology, and if individuals are made to fear (an all too often used political tactic) that can result in depressed spending and thus hamper the recovery.
August 25, 2010
Multiple measures, some included here, show marked improvement following the implementation of the stimulus package. I agree with Paul Krugman – it wasn’t big enough and the cuts made in the Senate negotiation were regrettable. Stimulus does work (historically we know that); it should be targeted to have both near-term and long-term benefit to growing the economy because that is how we will eventually reduce this debt. The current political climate is impeding our recovery.