Stimulated

The latest economic reports and analyses by prominent analysts indicate that the world and the country avoided a catastrophic collapse, and the Great Recession itself may have bottomed out, although it's still pretty bad for the non-wealthy. Though chances seem good that it won't get worse, it may be awhile before it gets noticeably better.


In his weekly address, President Obama noted that the latest data shows that the Recession was "even deeper than we thought" but that over the past few months the economy improved "measurably better than expected" which many economists say is "directly attributable to the Recovery Act."

Yes, the Stimulus the GOPers are complaining about. The immediate job creation portion saved a number of jobs, especially in state and local government (including teachers, fire departments, police, etc.) and by rescuing infrastructure projects about to be deep sixed, saved construction and vendor jobs. But in this day and age, starting new projects takes time, and those projects and jobs are just starting to show up. But the number of jobs created as well as saved for infrastructure projects doubled in June over just a month before. And that growth is expected to continue.

There's more evidence, according to economist Josh Blivens of the Economic Policy Institute. Thanks in large measure to the Economic Recovery and Reinvestment Act: Federal government spending grew at an 11% rate in the quarter, adding roughly 0.8% to overall GDP. State and local government spending grew at a 2.4% annual rate, the fastest growth since the middle of 2007. It is clear that the large amount of state aid contained in the ARRA made this growth possible.

Furthermore, real (inflation-adjusted) disposable personal income rose by 3.2% in the quarter, after rising by only 1% in the previous quarter. A large contribution to this increase was made by the Making Work Pay tax credit passed in conjunction with the ARRA, as this was the first full quarter that the credit was in effect. "

Blivens notes something else that's interesting, that major media doesn't mention. Though disposable income rose, it didn't translate into higher consumer spending. Why not? Because people are saving more (a sensible precaution and long term good thing.) Bliven points out that if more of the stimulus money had gone out as tax cuts or another round of stimulus checks as GOPers wanted, it's likely that money would also have gone into savings, and failed to stimulate the economy right away:

"This slippage between personal incomes and consumption spending caused by a rising savings rate makes plain that, instead of focusing on even more tax cuts, it was wise to make sure that much of the ARRA was devoted to direct public investment spending. The public investment spending in the ARRA, while not having a significant impact in the second quarter, will provide an even stronger boost to the economy in quarters to come."

Some of that spending is designed to strengthen the economy over the long term. It's a balancing act that a responsible Chief Executive must respect: people have immediate needs, and the economy has long term structural needs.

President Obama spoke to both of these concerns. "As far as I’m concerned, we will not have a recovery as long as we keep losing jobs. And I won’t rest until every American who wants a job can find one. But history shows that you need to have economic growth before you have job growth. And the report yesterday on our economy is an important sign that we’re headed in the right direction."

He said again (as USA Today noted) the economy needs a "new foundation" to ward off future crises.. including a better health care system, improved education and development of "a new clean energy economy."

Bliven is among those who believe even more federal economic stimulus would help, or is going to be needed. Certainly there are new challenges. Right now unemployment benefits are running out. States like California face economic as well as social catastrophes and chaos because of huge budget cuts and falling tax revenues. The ripples could send the national economy into another tailspin.