Fallout: The Financial Crisis

What’s the status of stimulus spending?

Jeremy Hobson Jun 2, 2010
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Fallout: The Financial Crisis

What’s the status of stimulus spending?

Jeremy Hobson Jun 2, 2010
HTML EMBED:
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TEXT OF STORY

Kai Ryssdal: Vice President Joe Biden was at the Brooklyn Bridge today. He was talking about a stimulus project to rehab the 117-year-old bridge between Brooklyn and Manhattan. The Obama administration’s $787 billion economic pick-me-up is more than a year old now. You pair that with news today that home sales were up, as people rushed to take advantage of an expiring tax credit, and we got to wondering how much stimulus might be left out there.

Marketplace’s Jeremy Hobson takes a look.


Jeremy Hobson: The White House says 80 percent of the stimulus funds have been allocated. But the vice president’s Chief Economist Jared Bernstein says, just three-quarters of stimulus funds will have been spent by the end of the year.

Jared Bernstein: This summer, for example, we’re going to see a lot more projects, but also, I think we’ll see a real ramp up in some of the more innovative investment side of the Recovery Act.

Bernstein says that’s because while early stimulus funds went directly to states, tax cuts and entitlement programs, many long-term investments in energy, health care and infrastructure are only now getting underway.

Bernstein: A lot of those applications had to come in over the first year of the act, be carefully evaluated, and you’re going to see a continuing ramp up of those in coming months.

The White House says this summer could be the biggest stimulus spending season yet. But Mark Zandi, chief economist at Moody’s Analytics, says that doesn’t mean it will have the biggest economic impact.

Mark Zandi: Well, what really matters to the economy is the change in the stimulus spent out; so we went from no stimulus in the beginning of 2009 to $80-90 billion a quarter. It’s that change that matters for economic growth.

And for that reason, he says a rapid drop-off in stimulus spending could actually hurt the recovery.

Zandi: The trick now is to allow the stimulus to fade, but to fade slowly enough that it doesn’t undermine the economic expansion.

The White House will have to focus on that later this year, when the stimulus begins to ramp down.

In New York, I’m Jeremy Hobson for Marketplace.

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