Stimulus Will Take A While To Work

Stimulus Will Take A While To Work - 1/12/2009

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2009 News and Press Releases

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

HEADLINE NEWS:

Stimulus Will Take A While To Work, Amid All The Anticipation Of Obama's Stimulus Package, Americans Should Realize That Its Effects Aren't Likely To Be Felt Until The Economy Is Already Rebounding On Its Own.
Anthony Karydakis

Fortune. January 12, 2009
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EXCERPT: The roll-out of the Obama Administration's fiscal stimulus package has been met with a huge amount of anticipation, heightened by a lack of specifics, which seem almost purposely elusive as a signal to Congress that this is essentially a draft open to discussion. However, the buildup of such expectations over the outcome of this process creates a distinct risk in casting the fiscal package as a near panacea for pulling the economy out of its current deep slump. With the economy in such a tough bind, there is tremendous pressure on the incoming Administration to show strong action on the fiscal front, of the pulling-out-all-the-stops variety. But the reality, based on hard facts on the ground and the quirky dynamics of fiscal policy, suggest that the potential of such a package to turn the economy around in any meaningful way in 2009 is actually quite limited. In fact, it is nearly impossible to alter the trajectory of economic activity over the next two to three quarters, fiscal stimulus or not. In other words, over that time frame, the economy will simply do what it is already on track to do, which is essentially to experience additional contraction. Among the many factors: corporate capital-spending plans for 2009 have already been downgraded and are not easily amenable to meaningful improvements, the rest of the industrialized world is likely to remain in a recessionary environment that hurts U.S. exports, and American consumers have grown increasingly anxious over job prospects, which will keep their spending habits on the defensive. The main obstacle to the ability of fiscal-policy measures to influence the path for the economy this year is that they usually require a frustratingly long amount of time to work their way through the system.

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