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Economist Criticizes Stimulus Package   January 12th, 2009
Says package will effect economy when recovery already happening       


More observations...

In further support of my recent criticism of Obama's proposed stimulus package, Anthony Karydakis (former chief U.S economist for JP Morgan Asset Management and currently an Adjunct Professor at New York University's Stern School of Business) says that the effects of the stimulus package will most likely come when the economy is already recovering by itself.


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...

This prospect brings to the forefront a historically well-established shortcoming of fiscal-stimulus packages, which is that they produce results too late to alleviate the near-term pain and, actually, tend to take effect when the economy is already in the process of recovering on its own and needs such help the least -- leading to a potential overheating of economic activity at that time. This is what has at times been aptly described as the "curse" of fiscal policy.

It really is so obvious and makes you wonder what the point of all this is? If the effects of the stimulus package aren't likely to be felt until the economy is already in recovery all by itself and no longer needs a stimulus, what's the point of spending $800 billion?

In short, I think it's strictly political. Obama wants to show the country that he cares by pushing through all this spending. And when the economy recovers (as it eventually will even without all the spending), he can claim credit for it and claim to have saved the economy.

Obama's election in 2008 cost about $746 million but it sounds like his 2012 reelection is coming with about an $800 billion price tag... and we're going to pay for it.

Update 2/9/2009: The CBO also suggested the stimulus plan could result in a long-term decrease in the economic output of the U.S., and that it was anticipating the recession would end in 2009 even without the stimulus package.

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