Possible Economic Recovery Tied to Obama Stimulus Package?

Well the BLS (Bureau of Labor Statistics) has released its monthly jobless claims report. In May, nonfarm payroll employment fell by 345,000, increasing the national unemployment rate to 9.4%.

Despite being the highest unemployment faced in this country in about 25 years, there is a little good news. Last month's jobless report --which is actually the measurement of the job loss in April--showed nonfarm payroll falling by 504,000. A difference of 159,000 jobs "saved" in a one month period.

All that stimulus must be the reason! Try again.

First off, what is a stimulus package supposed to accomplish? Well, as the name indicates it is suppose to stimulate or excite to greater activity, in economic terms at least. By definition as an equilibrating mechanism the stimulus should work instantaneously, but often they don't. This is exactly the case with the President's stimulus package which he signed into law back in February.

As it stands about $44 billion, out of $135 billion, has been paid out since the the bill was made law. From Recovery.gov.


Click on image to enlarge.

With trillions vaporized over the past months, it is difficult for a reasonable mind to fathom the concept that spending a mere $44 billion has actually "primed the pump" and caused the beginnings of an economic turnaround.

This brings me to this little golden nugget of information provided by the CBO (Congressional Budgetary Office). I am sure that over the coming days there might be an argument, or not, concerning the effects of the stimulus package on the beginnings of this "recovery." However this report actually highlights the lag effect of the stimulus spending and is an attempt to convince Beltway dwelling pols to speed up access to money so the turnaround can "begin.".

Although, I find it highly ironic that the jobless report is indicating the start of economic recovery without much assistance, if any at all, from the stimulus package. And here they are trying to get money out the door more rapidly. All in the name of starting a recovery, which is evidently happening on its own. On to the CBO report.

These first two PDF slides are quite enlightening about the attitude of policy makers and pols in the Beltway as the debate raged from mid-December to mid-February about what to do.






More specifically, it's the last sentence of each of these slides that really highlight the fear and angst that was raging in Washington over the looming economic catastrophe. Keyword to all of this is "perception." This opened the door for Mr. Never Let a Crisis Go to Waste and his cronies to get their flawed economic policies pushed through Congress like a greased pig.

Now the economic arguments that we will eventually hear from stimulus supporters probably will sound something like this, "Well this turnaround was obviously caused by the AARA and the money it has provided." "Obama's plan is creating or saving jobs!" Again, not exactly.

Slide 4 of 15 tells a little bit different story.



Out of the 24% of the stimulus money allocated for FY 2009, the largest portion of money, 32% to be exact, is going to entitlement programs. More than likely a necessary evil presently, but hardly a stimulant for economic recovery. As you can see this trend also continues from 2009-11 and only gets larger. But, how much to date has actually been spent on "shovel-ready" projects?

Slide 8 of 15.


This chart indicates that to date, less than $10 billion has been spent on infrastructure projects which were going to be the staple for job growth. CNN Money reported in late April that of the $75 billion Congress had made available, about $14.5 billion had been spent, mostly on Medicaid.

To my knowledge, there is no evidence that rampant spending on any sort of entitlement or social programs spur economic growth. With this in mind, then reasonably, there isn't any evidence supporting the claim that Obama stimulus package has stimulated the job growth. Quite to the contrary, if it has stimulated anything it is spending, period.

The strange part to all of this is if I am wrong and stimulus packages do work, it seems that the supposed recovery period we are in right now was spurred by former President Bush's infusion of almost a trillion dollars of liquid capital into the banking and financial communities. How is that for irony?

On a final note, supply-side economist Larry Kudlow, in a National Review Online blog post, makes a poignant argument that if we are in the beginnings of recovery, some serious thought needs to be given to de-TARPing.

Related articles:

NY Times-Joblessness Hits 9.4%, but Slowing Losses Raise Hopes

Innocent Bystanders-The May Unemployment Numbers are Here, and Worse Than Predicted

Fox News-For some good comedy, read what the Vice President had to say about the administration's plan to "speed-up" the economic recovery. If you guessed spending more money, you win the $64 dollar prize.

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