Sunday, August 02, 2009

GDP-Stimulus misdirection

The second quarter GDP report of negative 1% annualized wasn't too bad. (That's the first read on GDP, subject to multiple revisions.) Obama viewed that as the perfect chance to lie about the efficacy of the stimulus.

The stimulus didn't do what they said it would do, which is stop unemployment in its tracks. You'll recall this chart, which is the Obama team's projections of unemployment used to sell the stimulus with the subsequent actual unemployment added:



Several Democrats have admitted that the stimulus either hasn't done much or wasn't intended to. There are still low-level rumblings among Democrats about yet another stimulus bill.

The stimulus hasn't even been spent out that much. Here's a chart of the spend-out based on figures from Recovery.gov:


If we spot the administration a few days after the end of the second quarter and use the July 3rd figures, $60.4-bn of the $787-bn stimulus had actually been spent out, and $174.9-bn was "available". That's less than 8% of the total stimulus spent, less than a quarter "available". And recall that a disturbingly small amount of the spend-out was for actually stimulative projects. Fractions of fractions of the stimulus promoted economic growth by the end of the second quarter.

But that didn't stop the POTUS from claiming that the politically flailing stimulus contributed meaningfully towards the not-as-bad-as-expected GDP print.

From the AFP reporting:

"The report showed that in the first few months of this year, the recession we faced when I took office was even deeper than anyone thought at the time. It told us how close we were to the edge," Obama said.

"But it also revealed that in the last few months, the economy has done measurably better than expected. And many economists suggest that part of this progress is directly attributable" to the 787 billion dollar economic stimulus package known as the Recovery Act, he said.

"This and the other difficult but important steps that we have taken over the last six months have helped put the brakes on this recession," he said.

The economy will eventually recover, but the second quarter preliminary GDP number had very little to do with the stimulus. Who are these "many economists" and how many of them draw White House salaries?

2 comments:

Anonymous said...

I don't understand how you can be both critical of the stimulus spending and the fact that it has not yet been spent. What are you thoughts regarding todays unemployment data and the recent housing market data (I'm on service currently so haven't really read news for awhile). Matt

dyana said...

Good post...........

Thanks for sharing.............
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DyanaDevis

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