Will stimulus work fast enough?
Major job cuts announced this week add urgency to the bill as it nears a House vote.
Given its size and scope, the mammoth economic stimulus bill now moving through Congress may be unprecedented in US history. In that sense it represents a leap into the fiscal unknown.Skip to next paragraph
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Many economists agree that some kind of government jolt for the economy is necessary. Job cuts announced this week have only added to this urgency. Caterpillar, the world’s largest manufacturer of construction equipment, announced Monday it is eliminating 20,000 positions, about 18 percent of its workforce. Home Depot said it is shedding 7,000 jobs. Drugmaker Pfizer will cut 8,000.
That said, the stimulus package is a hybrid of short-term job creation efforts and long-term investments, with tax cuts and increases in social programs thrown in. Its macroeconomic impact remains uncertain. One particular question remains open: Will Uncle Sam’s cash begin flowing into the US economy in time to head off further deterioration?
“The economic benefit of the [stimulus] plan critically depends on how quickly the government spending can occur,” said Mark Zandi, chief economist of Moody’s Economy.com, in testimony before the House Budget Committee on Tuesday.
The $825 billion stimulus is virtually certain to pass the House of Representatives this week. The Senate has begun drawing up its version of the bill, and Senate majority leader Harry Reid says the legislation should clear both chambers and land on President Obama’s desk by the beginning of the Presidents’ Day recess, Feb. 16.
The bill contains about $550 billion in spending and aid to states and $275 billion in tax cuts. Republicans generally have said they believe the effort should tilt more toward tax cuts, which they claim would put money in consumers’ pockets more quickly than spending programs.
“The advertised benefits of many of these spending programs fail to play out in reality,” said Rep. Paul Ryan (R) of Wisconsin, ranking minority member of the House Budget Committee, at Tuesday’s hearing.