Stimulus' big boost to the economy? It already happened.
White House economist Christina Romer said Thursday that the stimulus package's impact on the economy will weaken from here on.
Americans hoping for a big economic boost from President Obama's economic stimulus programs got a douse of cold water Thursday: The White House's top forecaster said the largest impact of the stimulus on economic growth is probably in the rear view mirror.Skip to next paragraph
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That's the case even though unemployment continues to rise and many of the stimulus dollars haven't been spent.
"Most analysts predict that the fiscal stimulus will have its greatest impact on growth in the second and third quarters of 2009," Christina Romer, who chairs the President's Council of Economic Advisers, said in testimony prepared for Congress. "By mid-2010, fiscal stimulus will likely be contributing little to growth."
This view is shared by many economists, as Ms. Romer noted. But her assessment comes at a difficult time for both policymakers and for Americans in general.
Despite the massive $787 billion price tag, polls show that many Americans are skeptical about whether the stimulus is accomplishing much. Since the passage of the American Recovery and Reinvestment Act (ARRA), the nation's jobless rate has climbed higher than the White House and others had predicted.
Mr. Obama's approval ratings have sagged in recent weeks. Meanwhile, policymakers who back the stimulus have sent mixed signals. Some say not to judge the programs too soon, since most of the stimulus money hasn't been spent yet. But now Americans have been reminded that, in terms of gross domestic product (GDP), the impact of stimulus next year will be modest.
All this has big implications politically and for the economy.
Many Democrats say it's time to consider more measures to help job creation or to cushion the hardships facing the unemployed. Republican critics say the meager gains from stimulus so far are evidence that Democrats’ policies aren't working. Against that backdrop, and with voters worried about any new programs that come with a high price tag, Democrats are wary of calling anything a "second stimulus."
For her part, Romer used her platform Thursday before Congress's Joint Economic Committee to argue that rolling back the existing programs would be a bad thing.
"A premature end to stimulus would be misguided," she said in her prepared testimony.