In Congress, debate raged on about whether or not the historic stimulus package pushed by President Obama was too large. Countless hours spent groveling towards "The Big Three" (Specter, Snowe, and Collins) to make sure they approved of what the final version of the bill would be. All while listening to people like Mark Sanford claim we're headed towards real SOCIALISM (i wish!) in America.
Well, the verdicts are beginning to come in -- and it's not good.
TPM posted:
In Washington over the last two months, the debate was over whether the Stimulus Bill was too large. But the math -- that is to say, expected fall in aggregate demand compared with offsetting stimulus spending -- suggested a completely different problem. Namely, that it was too small, probably offsetting a half or less than half of the demand sucked out of the economy by the collapse of the housing bubble. And as the Post reports on tomorrow's front page, the verdict seems to be in: yep, it was too small.
There are many different metrics to use to get to this judgment. But a key one is that the Obama budget, which came out at the end of last month, assumed an average unemployment rate of 8.1% during 2009. Presumably, that was the assumption behind the Stimulus math too. But since we now know that the unemployment rate spiked to 8.1% in February that prediction seems unrealistically optimistic -- perhaps by a long shot.
All of which is to say that the monthly economic data are rapidly catching up with the pessimists' assumption about kind of steep and lasting recession we have in store.
Nor is it only the size of the Stimulus Bill that is implicated in these changing numbers. Because if the administration has been assuming less bleak unemployment rates than we're likely to see, then the tax revenues that the budget is based on won't come in and 'stress tests' they're running the banks through probably aren't stressful enough.
Joining the chorus, Martin Feldstein says we're likely to need a second Stimulus Bill. Perhaps soon.
WaPo posted:
Job Losses Could Drown Stimulus
Unemployment Soars to 1983 Level, Testing U.S. Response
By Neil Irwin and Annys Shin
Washington Post Staff Writers
Saturday, March 7, 2009; A01
The nation is losing jobs so quickly that the government, racing to deal with the crisis, is having trouble keeping up.
The U.S. unemployment rate last month leapt half a percentage point, to 8.1 percent, the highest level since 1983, according to data released yesterday. The stunning pace of job losses raises the possibility that, perhaps as early as this summer, one in 10 Americans will be out of a job even though they are actively looking for work. It also means that the government faces even more pressure to take further action to stabilize the economy and the financial system.
President Obama, speaking in Columbus, Ohio, to police cadets whose jobs were saved with money from the $787 billion stimulus package, called the new unemployment figures "astounding."
"We have a responsibility to act," he said, "and that's what I intend to do."
Analysts increasingly view the administration's actions so far as insufficient given the scope of the problem. The stimulus package was designed to "save or create" 3.5 million jobs, according to the administration. But the nation has already lost 4.4 million jobs since the start of the recession. Many banks and other financial institutions, whose health is critical to the economy, are teetering, and the Treasury Department has yet to finalize the details of its plans to remove from their balance sheets the toxic assets dragging them down.
"It's premature to say we need another stimulus, but the economy is performing much worse than when [the law] was signed, and the odds are increasing that we'll need a bigger policy response," said Mark Zandi of Moody's Economy.com, who has advised Democratic lawmakers. "What we've learned is policy has been a step behind this whole downturn. It's important to get a step ahead."
We have a crisis where neither many economists, nor the government (and in turn, most every American citizen) is not aware of the scope and depth of the problem at hand. The problem is simply too large for most people to comprehend.
The President's budget assumes the average 2009 unemployment rate would be 8.1% -- as we've seen in the recent jobless numbers, we appear to heading towards a much more bleak 2009 than that. The entire premise Team Obama was going with in order to determine their spending appears to be wrong.
And what's worse is that we will have a Right-Wing noise machine along every step of the way decrying any further action, and further stimulus money.
I have a really difficult time imagining Obama possessing the political capital within Washington to pass another trillion dollar spending bill. Even his healthcare spending - absent single payer, which is all but confirmed - won't be enough.
If this is true, what can we do? What will we do for all the people who are defaulting on their loans? Will the movements to keep people from moving out of the homes flourish? Should they?
How does President Obama move forward with this in mind?
Sigh.
For me, this whole situation is infuriating.
I would like at least one expert willing to openly state how much money needs to be funneled into the financial sector to achieve stability. A best guess they're willing to put their name to instead of just barking orders from the sidelines.
Companies like AIG seem to be yawning abysses of debt papered over by CEOs claiming things can be salvaged. I've seen numbers floated for the total debt including securities and all of the rest that eclipse the annual global GDP. How much of that debt is bad? How deep is the pit? And, most of all, why can't we figure it out? Why can't the banks come clean? If it's as big as some say the American taxpayer can't possibly fill that hole in even if they volunteered.
I realize we're all playing a game where we pretend the banks are functioning to keep confidence from vanishing totally, but if the banks are existing on lies and taxpayer largesse and nothing else then the whole system is doomed. What is being achieved by delaying the inevitable?
I don't really feel like anyone is being totally honest about the problem we face and I don't feel like we're working towards a solution.