WASHINGTON - NO, the big US economic stimulus plan won't 'save
or create 3.5 million jobs,' as the president and congressional
Democrats claim - at least not this year.
The economy will remain feeble through 2009, analysts warn, and
businesses will keep shedding jobs, though not as many as they
would have without the US$789 billion (S$1.19 trillion) boost.
The stimulus agreement, heading for final votes in the next day
or so, goes to the heart of President Barack Obama's strategy to
revive the economy and will go far in shaping how Americans view
his economic leadership.
What it won't do is quickly snap America out of the painful
recession, now in its second year.
It should provide some relief, economists say, though some argue
it won't plow enough money into the economy to prop it up.
Tax cuts will spur at least some spending by consumers and
businesses, and that should help save or create jobs. Aid flowing
to cash-squeezed states will prevent some layoffs.
And money for big public works projects, such as bridge and road
repairs, and longer-term ventures, such as networks for more
high-speed Internet connections, will eventually generate jobs and
stir economic activity.
But even with the stimulus, many economists predict a net loss
of 2 million, 3 million or even more jobs this year. The recession
already had cost 3.6 million through January. The unemployment
rate, now at 7.6 per cent, highest in more than 16 years, will
probably hit at least 9 per cent by next year.
'The stimulus package is not going to turn the economy around
right now,' said William Gale, director of economic studies at the
Brookings Institution.
'The best-case scenario is that it mitigates the depth and the
severity of the downturn. That's not a bad thing. It's just not the
magic bullet that fixes everything.' Some analysts say the job
market won't return to normal health - with unemployment hovering
around 5 per cent - until as late as 2013.
And the broader economy? No sudden revival there either.
The economy is expected to slide backward for all of 2009 - a
decline in gross domestic product of more than 1 per cent. That may
not sound like much, but it would be the first yearly decline since
1991.
'Congress put the minimum charge into the stimulus battery,'
said Brian Bethune, economist at IHS Global Insight. 'We're taking
this big chance, turning the key and praying there is enough juice
to turn over the economy. We should have juiced it up so much that
we are guaranteed that this engine will start' through a bigger
package of tax reductions.
What clues should people be looking for to judge whether a
turnaround is near? Companies will start easing up on their cost
cutting. That would mean fewer pay freezes or cuts. Companies will
start boosting workers' hours. And demand for temporary workers
will rise. After that, companies eventually will call back
workers.
This recession has proved especially stubborn and dangerous. The
root causes - housing, credit and financial crises - are the worst
since the 1930s and don't lend themselves to quick fixes.
The package includes Mr Obama's signature 'Making Work Pay' tax
credit for 95 per cent of workers. But negotiators scaled it back
from Mr Obama's campaign promise: to US$400 a year for individuals,
instead of his US$500, and US$800 for couples, down from his
US$1,000.
That equals around an extra US$13 a week in most paychecks this
year, and it should show up very quickly after Mr Obama signs the
bill.
The hope is that Americans will then feel more inclined to go
out and buy, which would help bolster the economy.
But will recession-shocked consumers, spooked by vanishing jobs,
shattered nest eggs, tanking home values and surging foreclosures,
actually spend money? 'Chances are people are going to save much or
most of the tax cuts because of the climate of uncertainty and doom
and gloom,' Mr Gale said.
Given the severity of the problems, economists said, the bigger
the economic revival package the better. Some said it needed to be
US$1 trillion to make a noticeable difference this year.
Others, like Mr Bethune, argued that the package should have
been front-loaded with a lot more money - at least US$500 billion -
in tax cuts, which tend to act more quickly to boost economic
activity.
Congress' package is close to what Mr Obama wanted: nearly
two-thirds in spending initiatives and just more than one-third in
tax cuts.
Mr Obama heralded the package, declaring it will 'save or create
more than 3.5 million jobs and get our economy back on track.'
House Speaker Nancy Pelosi, a fellow Democrat., mentioned the same
3.5 million figure, which an aide said was for a two-year
period.
A problem with such predictions: It's virtually impossible to
calculate whether a job has been 'saved.' -- AP
http://www.straitstimes.com/Breaking%2BNews/Money/Story/STIStory_337839.html
It won't. Thats just like trying to put out a fire by
starting many more fires. The flawed fundamentals still remain and
are aggravating the current situation.
"As the Obama
administration pushes through Congress its $800 billion
deficit-spending economic stimulus plan, the American public is
largely unaware that the true deficit of the federal government
already is measured in trillions of dollars, and in fact its $65.5
trillion in total obligations exceeds the gross domestic product of
the world.
The total U.S.
obligations, including Social Security and Medicare benefits to be
paid in the future, effectively have placed the U.S. government in
bankruptcy, even before new continuing social welfare obligation
embedded in the massive spending plan are taken into
account.
The real 2008 federal budget deficit was $5.1 trillion, not the
$455 billion previously reported by the
Congressional Budget Office, according to the "2008 Financial
Report of the United States Government" as released by the U.S.
Department of Treasury.
...
Calculations from the
"2008 Financial Report of the United States Government" also show
that the GAAP negative net worth of the federal government has
increased to $59.3 trillion while the total federal obligations
under GAAP accounting now total $65.5 trillion.
The $65.5 trillion total
federal obligations under GAAP accounting not only now exceed four
times the U.S. gross domestic product, or GDP, the $65.5 trillion
deficit exceeds total world GDP.
...
"Put simply, there is no
way the government can possibly pay for the level of social welfare
benefits the federal government has promised unless the government
simply prints cash and debases the currency, which the government
will increasingly be doing this year," Williams said, explaining in
more detail why he feels the government is now in the process of
monetizing the federal debt.
"Social Security and
Medicare must be shown as liabilities on the federal balance sheet
in the year they accrue according to GAAP accounting," Williams
argues. "To do otherwise is irresponsible, nothing more than an
attempt to hide the painful truth from the American public. The
public has a right to know just how bad off the federal government
budget deficit situation really is, especially since the situation
is rapidly spinning out of control.
"The federal government is
bankrupt," Williams told WND. "In a post-Enron world, if the
federal government were a corporation such as General Motors, the
president and senior Treasury officers would be in federal
penitentiary."
- Federal obligations exceed world GDP