Stimulus may soften, not end, recession
The most optimistic estimates foresee shaving two percentage points from joblessness rates.
President Obama’s mammoth stimulus plan may be the largest single bill Congress has ever considered. But that doesn’t mean it will solve all the economic problems facing the US.Skip to next paragraph
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The nation is mired in one of its worst recessions, and is likely to shed so many jobs and so much business production that even an unprecedented jolt of government spending wouldn’t by itself be able to replace the losses.
In a best-case scenario, by the end of 2010 the recovery package would plug about half the gap between actual Gross Domestic Product and what the GDP would be if the economy were healthy, according to the Congressional Budget Office. The corresponding unemployment rate might be 6.8 percent, in CBO’s judgement – two percentage points lower than it otherwise would have been.
“So even with a [stimulus] package of that size, there’s still a substantial shortfall in economic activity relative to what we could be doing,” said CBO director Douglas Elmendorf in Jan. 27 testimony before Congress.
With the Senate set to take up the stimulus bill this week, Mr. Obama is stepping up his efforts to win bipartisan support for the $800 billion-plus legislation. The House of Representatives passed its version of the stimulus package on Jan. 28 without a single Republican vote.
On Sunday, Obama hosted a bipartisan group of lawmakers for a Super Bowl party.
In his Jan. 31 radio and video address to the nation, Obama argued that the bill is necessary because it would create 3 million jobs, as well as make downpayments on needed investments in healthcare, education, and infrastructure.
But economic recovery will take years, not months, said Obama. “No one bill, no matter how comprehensive, can cure what ails our economy,” he said.
Republicans have pledged to work with Obama as he tries to fulfill his campaign pledge of bipartisanship.
The plan “falls far short of the president’s vision for a bill that creates jobs and puts us on a path to long-term economic health,” said Senate minority leader Mitch McConnell in the GOP’s own weekly radio address.
The stimulus bill contains, among other things, $82 billion in tax cuts for individuals, as well as $90 billion in aid for Medicaid programs, $80 billion for a State Stabilization Fund, and $49 billion for energy and water programs.