Economists See a Limited Boost From Stimulus

WASHINGTON — Even as the Obama administration braces for another grim report about job losses on Friday, economists say that the president’s $787 billion stimulus package has helped blunt the downturn in limited but discernible ways.

A report card on the stimulus plan offered by analysts nearly six months after it was passed by Congress suggests that the punch from increased government spending has helped the economy begin to bottom out faster than it would have otherwise. The tax cuts included in the plan, economists said, have had less of an impact because people tended to save the money or use it to pay down debt rather than spend it.

White House officials estimate that the stimulus program pumped about $100 billion into the economy through June. That was only a small share of the total projected spending, and much of the first wave came in the form of tax cuts, tax rebates and higher spending on safety-net programs like unemployment benefits and health care.

Private analysts say they think it added at least 1 percentage point to economic growth in the second quarter. That was not enough to prevent the economy from shrinking and joblessness from rising, but the pace of the decline slowed substantially compared with the first quarter.

“The signs of the stimulus are there,” said Allen L. Sinai, chief economist at Decision Economics, a forecasting firm in New York. “Government — federal, state and local — is helping take the economy from recession to recovery. I think it’s the primary contributor.”http://www.nytimes.com/2009/08/07/business/economy/07stimulus.html?_r=2&hp

The article goes on to say that the cash for clunkers program has been successful and that the stimulus program could help the economy grow by 3% in the months ahead as some projects are just getting started.

economics is largely about confidence and psychology.