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Stimulus Stumbles -- While Economy Heals Itself


Federal relief efforts have questionable impact on recovery.


Correlation, they say, doesn't always mean causation. Just because one event seems to lead to another doesn't mean it does -- in any complex system, the answer is unlikely to be that black and white.

Nearly 6 months after President Obama announced his $787 billion stimulus package, the economic outlook appears decidedly better than it was when he took office, at least to the casual observer. Job losses, while persistent, appear to be tapering off. Credit markets, while still gummed up, aren't nearly as frozen as they were last fall. Consumer confidence, while miserable, is no longer at its lowest.

In short, to quote Minyanville's Todd Harrison, "We've sold the car crash and bought the cancer." This is one man's way of saying that, to avoid an economic catastrophe, we've opted instead for a slow bleed, prolonging the ultimate day of reckoning in hopes that our wounds will heal in the meantime.

And each time a piece of economic data emerges that suggests the worst is behind us -- like today's positive reading on leading indicators -- Washington bureaucrats shout that it's because their particular pet policy has proved a smashing success.

To wit: In commenting on the relative effectiveness of the stimulus package, Jared Bernstein, chief economic adviser to Vice President Joe Biden -- whose office is handling the stimulus roll-out -- said that "It's working, it's demonstrably working."

But can recent economic data telling us the sky isn't falling -- but that it may fall -- be attributed to a functioning economic stimulus plan? The answer is an unequivocal no.

The stimulus was meant to be a 2-year investment package, with the bulk of the aid being doled out in the second half of this year. In fact, according to Bloomberg, just $103 billion -- or 13% of the total money allocated -- has been given out. For a country whose gross domestic product is more than $14 trillion, that figure barely registers.

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