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Obama's big steps meet tepid response

Despite Obama's three new economic initiatives, world stock markets have slumped and the Dow hit a six-year low.

By Staff writer of The Christian Science Monitor / February 20, 2009

President Obama's huge initiatives to rescue the economy haven't buoyed the stock market or New York's retailers.

Frank Franklin II/AP

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In many ways, it has been a remarkable political achievement: In one short month, President Obama has pushed a huge stimulus package through Congress, started on his version of a bank system bailout, and announced an ambitious plan to help struggling homeowners avoid foreclosure. All three prongs of his strategy for economic recovery are moving into place.

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But the reaction hasn’t exactly been euphoria on Wall Street – or Main Street, for that matter. Over the past four weeks, world stock markets have slumped, the Dow index has hit a six-year low, and there’s no sign that US consumers are reopening their wallets and showering desperate retailers with dollars.

This muted response may simply reflect the fact that recovery will take time, and the downturn is deeper than many economists predicted. Or it may be due, in part, to worry that the pieces of Mr. Obama’s strategy may not work together as advertised.

And part of it may be fear.

Things have been so bad for so long now, that all many Americans may be able to see is the tunnel.

“There’s a tendency when the economy is sinking to ask the question ... ‘when will it ever end?’” said Michael Mussa, senior fellow at the Peterson Institute for International Economics, in a Feb. 17 analysis of US economic prospects.

Slumps end, too

But recessions do end, said Mr. Mussa, even bad ones. This one will, too.

“Once the negative forces that are pounding down the economy abate, there is a natural tendency of the economy to recover,” he said.

Meanwhile, new economic statistics continue to be gloomy. The Labor Department reported on Feb. 19 that the number of laid-off workers receiving regular unemployment benefits jumped to 4.99 million, an all-time high.

By way of contrast, the corresponding figure from a year ago was 2.77 million.

Wholesale inflation also took an unexpected and unwelcome upward jolt. It jumped 0.8 percent last month, the biggest such gain since July, led by a 3.7 percent increase in energy prices.

Rising job worries

According to a new Associated Press poll, Americans are becoming more concerned about losing jobs.

Nearly half of poll respondents, 47 percent, said that they worry at least somewhat about losing their employment.

The poll also found support for Obama’s stimulus plan declining somewhat. Fifty-two percent of respondents approved of the plan, down from 55 percent in January.

Obama administration officials admit that their economic strategy isn’t going to turn the economy around on a dime, and that unemployment could drift higher, perhaps into double digits.

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