Posted by
Dave Smith on Tuesday, June 02, 2009 11:07:01 PM
In the midst of economic bad news — the
Bureau of Economic Analysis reports that the economy
shrunk
by 6.3% in the 4th quarter of 2008 and by an additional 5.7% in the 1st
quarter of 2009, and another half-million jobs were lost in April —
some good news is starting to trickle out. The
Bureau of Labor Statistics
reports that in April the Consumer Price Index was unchanged, hourly
earnings were up and productivity increased. Additionally, the
Institute for Supply Management
reports that new manufacturing orders grew in May for the first time in
a while, and overall economic activity was up. Other key indicators
tracked by ISM that were still contracting were at least slowing in
their negative growth. The 3-month trend of the
Dow Jones Industrial Average is positive, and
Larry Kudlow reports that both housing and commercial construction were up in April.
So
is the economy on the upswing, finally pulling us out of our doldrums?
Well, the Congress did pass the massive, $787 billion American Recovery
and Reinvestment Act earlier this year — the so-called "stimulus bill"
— with the claims by President Obama that it was critical to ending our
economic slide and moving towards recovery. He had urged Congress to
act quickly to pass the bill; Congress did so with little (in the
Senate) or no (in the House) Republican support, and in spite of a
letter signed by over 200 economists urging non-passage of the bill
that appeared in the
Wall Street Journal and the
New York Times.
Is
the so-called "stimulus bill" the source of our possible economic
recovery? Should recovery occur, no doubt the politicians instrumental
in enacting the legislation — President Obama and Congressional
Democrats — will claim credit for their efforts. But a closer look is
in order.
As promised by President Obama, the "stimulus" spending is being tracked by each agency and posted online at
www.recovery.gov . The numbers are interesting:
less than $37 billion has been spent thus far.
That is worth repeating: out of $787 billion in the total stimulus
bill (for projects that were supposedly "shovel ready"), less than $37
billion has been spent in an economy worth nearly $14
trillion
per year. For those counting, that's less than 5% of the total
"stimulus" package and approximately 1/4 of 1% of the annual economy.
This
begs some questions, but also seems to put the proponents of the
spending package in a trap: if the economic turnaround is the result
of the government spending, thus meaning that only $37 billion in
stimulus was necessary, why did we need $787 billion? On the other
hand, if the government spending is
not the reason for the positive economic signs, then the economy must not have needed
any stimulus. Either way, it would seem that we don't need to spend the entire $787 billion. It would also seem to suggest,
as pointed out by Dr. Russell Roberts,
Chairman of George Mason University's Economics department, that
perhaps the bill wasn't as urgent as the politicians said it was —
perhaps they could have actually read the entire bill after all.