Wednesday, July 1, 2009

Stimulus and the Economy

On Sunday, Carrie and I were driving up to Albany to pick up a traveling son from the airport. We took the scenic route and stopped in at a small art gallery along the way. As we were making a purchase, the artist/owner asked me what I did for a living. When I told him that I worked in the business school at Syracuse University, he turned and asked me a simple question: “When is it going to be over?” Of course he was talking about the economic situation in the USA, and that comment came back to me as I was reading one of my favorite blogs, Calculated Risk Finance and Economics. According to a post this morning, the answer could be really soon.
In a discussion of the economy and the stimulus package, here is what Calculated Risk said:

There are two possible explanations that the administration was so wrong. ... The first explanation is that the economy has deteriorated because the stimulus package failed. ... The second answer is that the economy has deteriorated in spite of the stimulus.
Very little of the stimulus has been spent so far, so it is premature to say it failed. However Romer (Christina Romer, a senior White House official) recently was
quoted in the Financial Times:

Ms Romer said stimulus spending was “going to ramp up strongly through the summer and the fall”. “We always knew we were not going to get all that much fiscal impact during the first five to six months. The big impact starts to hit from about now onwards,” she said. Ms Romer said that stimulus money was being disbursed at almost exactly the rate forecast by the Office of Management and Budget. “It should make a material contribution to growth in the third quarter.”

So we should see an impact in the 2nd half of 2009 ... and that starts now!

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