Are Biden's bold claims about the stimulus true?
The vice president said Thursday that the $787 billion recovery act helped save the US from a depression. He's partially right, experts say. But the rising federal deficit is worrying.
The White House on Thursday pitched a simple and decidedly upbeat message about its economic stimulus:
"The recovery act has played a significant role in changing the trajectory of the economy," Biden told an audience at the Brookings Institution in Washington. "Instead of talking about the beginning of a depression, we are talking about the end of a recession."
Private-sector policy experts, however, are taking a more nuanced view.
Plenty of economists agree with Mr. Biden, saying the stimulus is helping. But many also are worried that the debt-fueled spending surge is going too far.
At a minimum, they say it's time for the US to start thinking about how to get its fiscal house in order.
It's a tricky balancing act. Data do suggest the stimulus is having an effect.
GDP will be higher this year, and unemployment lower, thanks to the mix of tax cuts, aid to states, and infrastructure spending that the recovery act includes, many economists agree.
Forecasters at Goldman Sachs estimate that thanks to the stimulus programs, economic activity was 2.2 percent higher in the second quarter than it would have been otherwise, and that the impact will peak in the current quarter at 3.3 percent.
Meanwhile, the unemployment rate will be 2 percentage points lower than it would have been without the stimulus package, according to an estimate by Mark Zandi of Moody's Economy.com in West Chester, Pa. Biden said half a million jobs may have been saved by the program so far, although that's just a partial step toward what the Obama administration hopes to generate over the next year or more.
The US has lost about 6.7 million jobs since the recession began in December 2007.
Even as many policy experts support the stimulus measures, though, others say the imperative now is to start getting budget deficits under greater control.
An August survey of 266 private-sector forecasters found that 50 percent said America's fiscal policy is too stimulative (versus 11 percent who said "too restrictive"). Three-quarters say they hope fiscal policy will be tightened in the next few years, yet the prevailing view is that the opposite will occur.
In part, the critique may involve economists playing Monday morning quarterback.
Back in March, just after the recovery act was passed, the same forecasters surveyed by the the National Association for Business Economics were more concerned that fiscal policy would be "too restrictive" (36 percent said so) than "too stimulative" (33 percent).
Since March, the economy has stabilized, and the risk of a deepening recession has faded. But if the polls show shifting priorities, they're also a reminder that the nation's fast-rising federal debt is a very real problem, which could restrain economic growth in coming decades.
Economists expect the effects of the stimulus to wane in 2011, but by then the hope is that government will be able to pass the baton to a reviving private sector.