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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.

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House Republican Kevin Brady of Texas voiced a range of concerns about the Obama policies just before Romer spoke. Although the stimulus aims to boost consumer spending and jobs, he said individuals and businesses now worry about tax hikes on several fronts starting in 2011.

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"The government’s uncertainty and interference is quickly turning a 'rescue operation' into an anchor around the private sector’s neck," he said.

Both sides in this political debate know that jobs are the great need in the view of voters. And so far, their jury is out. In recent polls, fewer Americans say the stimulus is helping or hurting than say they see “no impact,” are unsure, or say that it’s “too soon to tell.”

Saving and creating jobs is key

The impact is also a matter of sharp debate among economists. Romer cited estimates that in the third quarter of this year, the economy would have had 1 million fewer jobs without the stimulus. Some $195 billion of the stimulus has been spent through the end of that quarter, she said.

The impact on jobs doesn't follow precisely the pattern of the impact on GDP. Economists see the stimulus contribution to GDP as greatest in the third quarter (Romer estimates a 2.7 percent upward bump). But the impact on jobs will be greatest next year, according to past estimates by Romer's team.

Some forecasters outside Washington say it's hard to discern a large impact on jobs so far from the collection of tax cuts, emergency assistance, and direct government spending.

Very little of the stimulus has gone into spurring investment by businesses so far, says Rajeev Dhawan, who directs the forecasting center at Georgia State University in Atlanta. "That is the only way we be able to sustain job growth down the road."

He describes some components of the ARRA as needed help for an economy in distress: aid to cash-strapped local governments and the unemployed. Without those programs, he says layoffs by state and local governments would have been higher.

Among the measures Democrats are considering: a tax credit for firms that hire, and further extensions of jobless benefits and of tax credits to spur home-buying activity.

Rather than a second stimulus, Mr. Dhawan says the economy's big need is to clean up banks so they are better able to finance business. The fix might involve acknowledging bad loans on their books, selling these assets to willing buyers, and getting fresh capital so they can lend again.

For job creation, he says, "the credit has to flow properly."

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