Sunday, December 21, 2008

Size of stimulus plan growing

It is a measure of the magnitude of the current "recession with adjectives" that the projected and rumored size of the fiscal stimulus plan continues to grow. The latest rumor is that the goal will be to "create or save" 3 million rather than merely 2.5 million jobs over the next two years and that the price tag over two years is now projected at $775 billion in contrast to the original $500 to $700 billion. And, the plan is still evolving as the economy continues to deteriorate.

An open question is how much of that money will be front-loaded for the first year and even the first six months.

Another open question is what a follow-on revision might look like if after six months the result is too weak or the underlying economic problems turn out to be significantly worse than currently anticipated.

Not to mention the fact that the net job loss might be more jobs than the stimulus will supposedly create.

Not to mention the fact that there are millions of people who are underemployed or have given up hope of finding jobs as a result of the quirky economy of the past eight years and are not counted in the official unemployment number even though they are not working at anything near their peak of productivity.

The big question is how much money will be deployed in the first three or four months and how quickly that money results in an increase in economic activity by the time we hit the six-month milestone and need to judge whether to adjust the course of the stimulus plan.

Still, this is a good first step. There really is nothing better to do than to give the economy a good swift kick, the stronger the kick the better. And if the first kick is not enough, keep on kicking.

This kind of approach is very likely to assure that the economy does not slip into a depression.

-- Jack Krupansky


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