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President Obama Announces Ramp Up In Stimulus Spending

The White House is apparantly feeling the heat after last week's unemployment data was released showing an historic spike in joblessness at 9.4%, a figure much worse than what was promised during the Stimulus "debate". The White House released a statement today saying that it is ramping up stimulus spending exponentially in the next three months:

President Barack Obama is announcing Monday that he is ramping up stimulus spending exponentially in the next three months, allowing the administration to "save or create" 600,00 jobs -- four times as many as during the first 100 days since he signed the bill.

"As a result of this accelerated pace of activity, over 600,000 jobs are expected to be created or saved by the Recovery Act in the second 100 days," compared with roughly 150,000 in the first 100 days, the White House said.

Critics are finally starting to focus on the inane "save or create" concept:

Obama also will face increasing questions not only about the deficit explosion, but uncertainty about the effectiveness of the $787 billion stimulus bill. Republicans say the "save or create" metric for jobs is meaningless, since it's impossible to prove or disprove.

Senate Minority Leader Mitch McConnell (R-Ky.) said in a quote provided to POLITICO: "I'm very skeptical that the spending binge that we're on is going to produce much good and, even if it does, anytime soon."

That the $785 billion dollar spending bill was oversold is beyond dispute now based on the Obama administration's own promises. What remains is how the US economy will navigate an environment of negative growth, rising interest rates, rising unemployment and rising energy prices (did you purchase gasoline this weekend?). Some people are starting to pay attention:

While the administration is sensitive to criticism that stimulus spending has been too slow, a new Gallup Poll shows danger in the other direction. For the first time, a majority of respondents disapprove of Obama on the issue of "controlling federal spending" (51 percent to 45 percent), compared to the 67 percent who view him favorably overall.

Increasing the rate of stimulus spending will not put a dent in any of these problems; rather, it will exacerbate them because the spending is poorly targeted and financed through increasingly expensive borrowing. Add to that the uncertainty generated by the Obama administration's plan to raise taxes on the wealthy (small businesses) to pay for the ObamaCare legislation and you have the perfect recipe for a prolonged recession.


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Comments (22)

Obama must be going on a bi... (Below threshold)
J:

Obama must be going on a big government hiring binge to get the numbers up. I mean the scads of people he has had to hire to take care of michelle, the girls, his mother-in-law must add up to a healthy sum, but he can do better, yes he can.

And when the 600,000 don't ... (Below threshold)

And when the 600,000 don't materialize he'll promise to spend a trillion and half to conjure 1,200,000 jobs.

And so on.

We're not wasting the money... (Below threshold)

We're not wasting the money fast enough.....let's waste it faster.

The mainstream media wouldn... (Below threshold)

The mainstream media wouldn't do it. So we are trying to get your important messages to the American people. 43 This post is a suggested read at, http://aresay.blogspot.com/

The problem for Obama is th... (Below threshold)
Mac Lorry:

The problem for Obama is that in any recession people respond by cutting spending. If you give someone a one time check they pay off bills or put it in savings, neither of which creates demand. The $13 dollars a week the average worker is supposed to get doesn't cover the increased cost of gas and food let alone stimulate spending.

Construction projects and aid to states do create or save jobs, but the very thing that works best in stimulating the economy is the very thing democrats can't use without eating lots of crow. Before this recession is over democrats will have to come up with another name for tax cuts.

Well, personally, I think t... (Below threshold)
ExSubNuke:

Well, personally, I think that there's another way to stimulate people to spend money, and it involves stimulus checks also. It's more along the lines "Give everyone $50,000 and watch all the stimulus". It also neatly bypasses all the pork associated with that "stimulous" (porkulous) bill.

But those dunderheads down at foggy bottom can't POSSIBLY advocate such an elegant and simple solution.

I see no reason to believe ... (Below threshold)
Hank:

I see no reason to believe anything Obama or his administration says.
From the campaign to the present, Obama has displayed an incredible talent for saying one thing while doing the opposite.

They have no clue, they know it, so they continue to blame Bush as Goolsbee did yesterday when talking to Chris Wallace.

You bet his poll numbers are dropping.
Reading a damn teleprompter only goes so far.

Time to Double Down! This ... (Below threshold)
Aubrey:

Time to Double Down! This $1 machine isn't paying off, we can change our luck by moving to the $10 machine. Hold my beer and watch this!

I hate communism.... (Below threshold)
914:

I hate communism.

It's becoming increasingly ... (Below threshold)
bill-tb Author Profile Page:

It's becoming increasingly obvious that the Obama stimulus plan is a miserable failure. Proving you cannot spend your way to prosperity once more.

At least the EU has got it right.

Flush faster! The money isn... (Below threshold)

Flush faster! The money isn't going down the toilet fast enough!

In 2010, we are going to need to elect some people to clog that stimulus toilet

So why didn't out omnipoten... (Below threshold)
Neo:

So why didn't out omnipotent "god" Barry see this coming ?

Great....just what we need.... (Below threshold)
Thor-Zone:

Great....just what we need....more government spending.

And here I thought we spent too much in the 80's.

Did you notice Obama's nose... (Below threshold)
Trajan:

Did you notice Obama's nose growing as he
presented his state of the economy diatribe
on TV this a.m.? I was also watching his ears.
They stayed unchanged. The nose is catching
up.

Barry never was any good at... (Below threshold)
GarandFan:

Barry never was any good at math. Can hardly wait for the day when the Treasury tells him "Hey boss, we're outta ink and outta paper". Oh what will Barry do then?

HOW THE STIMULUS PLAN HAS B... (Below threshold)
Aluceo:

HOW THE STIMULUS PLAN HAS BEEN WORKING ALREADY AND WHY IT IS BOUND TO GATHER PACE

The stimulus plan in of itself has halted the dramatic plunge in business and consumer confidence with the very likely threat of an economic depression earlier in the year, and businesses and consumers taking a less weary and more upbeat attitude to the future. Maybe more than anything else this will be the most significant impact of the stimulus package in the long-run enabling a spectacular recovery from the real possibility of depression before its passage. Businesses and consumers have become more and more confident that spending from the stimulus in the upcoming months will provide a solid environment for economic activity thus encouraging investment, reducing the pace of job losses and encouraging consumer spending. In other words, the stimulus package has avoided "a cycle of economic downturn to depression" and is now about to engender "a cycle of economic upturn to recovery".

The stimulus package cash handouts and other social initiatives have played no minor part in lessening the burdens on individuals of the economic downturn and the consequent increase in the number of people unemployed thus palliating its effects with regards to mortgage, health coverage and consumer spending.

The stimulus package has halted the lost of jobs in in the areas of education and other state level services and enabled States to avoid budget bankruptcy (caused by the fall in revenues due to the economic downturn) with the result of avoiding indirect job losses in the private sector as well.

The stimulus package is bound to lead the way for new jobs creation to be followed suit by direct private sector investments with the consequence of increasing spending in the economy and accelerating economic recovery. It should be noted that jobs created by the stimulus will have a multiplier effect in the creation of jobs by private enterprises.

Perhaps more fundamental for long-term economic recovery, given the areas of investment of the stimulus package (infrastructure, energy and green jobs, education. etc.), it is the type of government investment required for renewing long-term economic growth. As was the case with FDR's New Deal in the 1930s and Eisenhower building of interstate highways and investment in the sciences in the 1950s, the stimulus package is bound to restructure the foundation of the US economy within which private enterprise will thrive.

The fundamental element in the criticisms levied against the stimulus package that it will increase the US deficit is the total disregard by most critics of what would have happened without the stimulus with respect to avoiding the real threat of a depression, raising business and consumer confidence and restructuring the economy. Thus providing a good foundation for real growth in the long-run (boostered by the Stimulus and led by private enterprise) with economic growth by itself and healthcare reform allowing for deficit reduction in the long-run.

While the Stimulus Package has often come under this one-sided criticism of increasing the US deficit, such an argument can only be credible to the extent that it elicits how the results mentioned above which have been obtained (and are to be obtained) by the Stimulus Package could have been attained otherwise. Most critics of the stimulus package seem to think that this economy which was at the very brink of collapse simply avoided a depression by some miracle and that by the same token recovery is bound to occur by magic. To the extent that their arguments fail to answer these fundamental facts about avoiding a depression and beginning a recovery, to that extent, such arguments can hardly be considered credible.

Aluceo 9:42How dee... (Below threshold)
Trajan:

Aluceo 9:42

How deep is the ocean? How deep is
your love for the Peripatetic Prez?...or
HIS ego? Your leftist education, I hope,
didn't come at the expense of hard working
taxpayers. Obama is a master of rhetoric.
In you he has a groveling liege.

Aluceo,It is conside... (Below threshold)
SCSIwuzzy:

Aluceo,
It is considered bad form, borderline asshat level really, to post the same multi-paragraph comment on every blog you visit.
So, assuming you come back, if your ready to stop being a douche and discuss the points the author or the commenters have made I am sure people will be ready to engage you.
Esp since the only thing that sets it apart from a Hooson post is the complete lack of self aggrandizement.

ExSubNuke:It's mo... (Below threshold)
_Mike_:

ExSubNuke:
It's more along the lines "Give everyone $50,000 and watch all the stimulus".

I suggest reading the first few chapters of Milton Friedman's "Monetary Mischief". Specifically, the gedanken experiment involving the helicopter.

My guess is that Obama is planning on using the delayed 'stimulus' as essentially a campaign fund to grease select districts for 2010/12... meanwhile, the 'crisis' keeps the public pliable.

Aluceo' here we go again.. ... (Below threshold)
914:

Aluceo' here we go again.. Aluceo' here we go again again.. we aint learned our lesson yet.

One of President Obama's ke... (Below threshold)
George Meredith MD:

One of President Obama's key objectives, this first term, is clean air and reduced dependence on foreign energy imports. I fear that biofuels and massive wind farms are not the answer. Too expensive. Would have to borrow hundreds of billions of dollars to accomplish this...or would have to run the printing presses at the Treasury non-stop!

Let me humbly suggest an alternative:
· An adjustable oil and natural gas import tax
· Reduce the national speed limit to 55 mph
· Remove permitting obstacles to new US toll roads
· Remove all governments and labor unions from all mass transit in the US...let the private sector do faster, better and cheaper
· Expedite licensing of new nuclear power plants...think about all the truly good paying jobs involved here
· Quickly proceed with permits for the newly discovered oil and gas fields in the Gulf of Mexico and in North Dakota (horizontal drilling)
· Remove permitting obstacles to new natural gas lines
· Remove any import taxes and/or regulations to the new turbo diesel VW Jetta TDI that gets .are you ready...58 mpg!!!...clear the regulations so that US car makers can buy this clean, common rail, turbo diesel engine

Mr. President: forget about biofuels and wind farms...they are dead end streets. Furthermore, the above listed options would cost the government nothing! Let the private sector do it cheaper and better. And we would not have to borrow a penny for these projects! Private capital would rush into these projects!

You want clean air, good paying jobs and less dependence on foreign energy supplies, why here is your answer!

HOW THE STIMULUS PLAN HAS B... (Below threshold)
Aluceo, NY:

HOW THE STIMULUS PLAN HAS BEEN WORKING ALREADY AND WHY IT IS BOUND TO GATHER PACE

The stimulus plan in of itself has halted the dramatic plunge in business and consumer confidence with the very likely threat of an economic depression earlier in the year, and businesses and consumers taking a less weary and more upbeat attitude to the future. Maybe more than anything else this will be the most significant impact of the stimulus package in the long-run enabling a spectacular recovery from the real possibility of depression before its passage. Businesses and consumers have become more and more confident that spending from the stimulus in the upcoming months will provide a solid environment for economic activity thus encouraging investment, reducing the pace of job losses and encouraging consumer spending. In other words, the stimulus package has avoided "a cycle of economic downturn to depression" and is now about to engender "a cycle of economic upturn to recovery".

The stimulus package cash handouts and other social initiatives have played no minor part in lessening the burdens on individuals of the economic downturn and the consequent increase in the number of people unemployed thus palliating the effects with regards to mortgage, health coverage and consumer spending.

The stimulus package has halted the lost of jobs in the areas of education and other state level services and enabled States to avoid budget bankruptcy (caused by the fall in revenues due to the economic downturn) with the result of avoiding indirect job losses in the private sector as well.

The stimulus package is bound to lead the way for new jobs creation to be followed suit by direct private sector investments with the consequence of increasing spending in the economy and accelerating economic recovery. It should be noted that jobs created by the stimulus will have a multiplier effect in the creation of jobs by private enterprises.

Perhaps more fundamental for long-term economic recovery, given the areas of investment of the stimulus package (infrastructure, energy and green jobs, education. etc.), it is the type of government investment required for renewing long-term economic growth. As was the case with FDR's New Deal in the 1930s and Eisenhower building of interstate highways and investment in the sciences in the 1950s, the stimulus package is bound to restructure the foundation of the US economy within which private enterprise will thrive.

The fundamental element in the criticisms levied against the stimulus package that it will increase the US deficit is the total disregard by most critics of what would have happened without the stimulus with respect to avoiding the real threat of a depression, raising business and consumer confidence and restructuring the economy. Thus providing a good foundation for real growth in the long-run (boostered by the Stimulus and led by private enterprise) with economic growth by itself and healthcare reform allowing for deficit reduction in the long-run.

While the Stimulus Package has often come under this one-sided criticism of increasing the US deficit, such an argument can only be credible to the extent that it elicits how the results mentioned above which have been obtained (and are to be obtained) by the Stimulus Package could have been attained otherwise. Most critics of the stimulus package seem to think that this economy which was at the very brink of collapse simply avoided a depression by some miracle and that by the same token recovery is bound to occur by magic. To the extent that their arguments fail to answer these fundamental facts about avoiding a depression and beginning a recovery, to that extent, such arguments can hardly be considered credible.

Actually, the initial impact of the stimulus for private enterprise and consumer confidence has been "anticipatory" in that it arrested a situation where the trend of business and consumer confidence was heading the economy to a depression. That is why the statistics point to the fact that business and consumer confidence stop plunging after the stimulus plan was passed and the stock market has been "going north" since then. It is the anticipation of the impact of the stimulus plan that has stabilized business and consumer confidence, heading off the real prospect of a depression. In other words, the stimulus package first impact was to act as the brakes for an economy that was heading to a depression disaster.

http://www.rususa.com/money/finance.asp See link above for the effect of the stimulus plan on the stock market immediately after its passage in mid-February 2009: the NASDAQ, Dow Jones and S & P 500 have made a dramatic U-turn upward since March 2009.

The reason for the high job losses is very simple. Those jobs were going to be lost anyway as business and consumer confidence entered a vicious cycle to depression following the failure of the financial system - these job losses arose out of lack of confidence in the financial system. Actually, the stimulus role at the onset more than any immediate spending in the economy itself has been to provide assurance to consumers and businesses that government will spend in the economy thereby upholding consumer and business confidence and avoiding the real prospect of a depression. So the stimulus first role has been "anticipatory" in forestalling a depression.

Believe it or not, it is not out of the question that without the stimulus plan we might have been talking now about the loss of not 1.6 million jobs but 5 or 6 million jobs at the trend at which consumer and business confidence went on falling before its passage. See link on the rise of consumer confidence since the stimulus plan was passed in mid-February 2009.
http://www.market-harmonics.com/free-charts/sentiment/consumer_confidence.htm

Actually, the word "stimulus" here can be misleading in that it underemphasizes the effect of the stimulus in arresting a grave and downward spiral of the economy and rather draw focus mainly on creation of jobs which is the second and yet to fully come dimension of its impact.

Let's imagine that the stimulus plan was to be suspended now. What will happen is that the anticipation consumers and business had about its boosting effect on the economy will die out, and this of itself will create uncertainty and may well lead to a new downward spiral. The Stimulus has a double effect with respect to recovery and job creation. Perhaps the lesser acknowledged effect is the confidence created in the economy for private enterprise and consumer consumption. In fact, this indirect effect will be the strongest push for economic recovery and job creation. Then there is the direct effect of the Stimulus Package spending and its multiplier effect given the areas of expenditure (education, infrastructure, green jobs, etc.)

While critics are pointing to the fact that unemployment is already at 9.4 percent compared to the prediction of 8.8 percent for 2010 made by the Administration, many forget that Economics like Meteorology or Earthquake Prediction for that matter is "no Physics or Maths". What ultimately matters is the bigger picture and trends. Going by the job loss figures for March, April and May (652000, 504000 and 345000 respectively) the argument made by the administration definitely holds. In fact, the Fed, the Treasury as well as other institutions involved in the prediction of economic data tend to revise their figures quite often. What matters is the trend and bigger picture.

The Stimulus is rather like a project but in this instance a massive and complex national project. A project can be broken down in two broad categories: design and execution. At the design stage (the first few months of the Stimulus), everything is being organised and put in place administratively with relatively little being carried out. The upcoming months will be the period when the massive spending and investments will be executed at an exponential rate. In fact, 1 billion dollar is already being allocated each day for Stimulus projects.

In layman's terms, the Stimulus is needed for the simple reason that with the failure of the financial system, businesses and consumers were less willing (uncertainty) and less able (banks failures and failure to provide credit) to produce and spend in the economy implying that companies sold less goods and services than usual and so the companies had to lay out workers who in turn bought less and so the cycle goes (and this might just as well have led to a depression).

What the stimulus is meant to do, and is doing, is to incite and give businesses and consumers the confidence to keep on producing and spending respectively for the upcoming spending in the economy it is to generate exponentially. Initially by giving tax breaks, benefits, spending to maintain teaching and social services jobs and then spending on stimulus projects contracts given to companies which are then encouraged not to lay off workers. All these with the consequent multiplier effect in the economy.

Companies and consumers effectively bought to this idea once the Stimulus bill was enacted and kept on producing and consuming respectively in anticipation that upcoming Stimulus spending will maintain a stable economic environment from which recovery is possible. Hence the reason why the stock market and consumer and business confidence started rising. This effort was accompanied by the bank bailout and efforts to provide credit to consumers and companies.

It is effectively because the Stimulus Package is real, a commitment of 789 billion dollars by the US government for real economic projects, that consumers and businesses bought to the scheme and started acting in a positive manner in anticipation of its positive impact in the upcoming months (the Stimulus Package direct impact should enter in full force by the fourth quarter). In fact, many economists have even argued that the amount provided for the Stimulus should have been much more higher.

As a final note, I'll argue that irrespective of party creed, it will seem to me that the criticism levied against the Stimulus is much more of a "political vogue" (and has nothing to do with "realistic" economics) naïvely taken up by the media which tend to operate on the basis of "two sides to any story" (not a criticism though). The milestone which any such critical arguments has to overcome is to answer the question: how could a depression be avoided and a recovery started following the failure of the financial system?




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