Is The Stimulus Plan Working?

Jul 06, 09 Is The Stimulus Plan Working?
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The news from throughout the country has been discouraging.  Unemployment hit 9.5%, while real unemployment hovers around 16.5%.  Over two million jobs have been lost since Mr. Obama took office.  Foreclosures are rising, while economists expect 1.5 million people to file bankruptcy this year.  Many states are facing severe fiscal crises, with California being on the verge of bankruptcy.

Facing such dismal news, Vice President Joe Biden was forced to concede on ABC’s This Week that the Obama administration had misread how bad the economy was.  However, Mr. Biden, among other administration officials, believe that it is too premature to begin crafting a second stimulus, considering only 10% of the $787 billion in stimulus funds have been distributed thus far.

In addition, many have been disappointed by the Obama’s administration’s proposal to regulate financial institutions.  While the plan has definite merits, it fails to rein in those people and institutions most responsible for the financial meltdown.

Mr. Obama’s plan does give the Federal Reserve the power to regulate any systemically important institutions, such as Lehman Brothers and Bear Stearns.  The Federal Reserve would also have the power to seize any insolvent institutions.  While these are very important and much needed steps, they fail to address any meaningful preventative measures.  His plan lacks teeth.

The “hindsight is 20/20” and “Monday morning quarterback” analogies do not work well here.  Many prominent economists warned that in order to truly fix the economy the adminstration would have to pass an adequate stimulus and rein in Wall Street excess.

It is becoming painfully apparent that the stimulus will have a limited impact on the economy.  While Wall Street has not quite returned to business as usual, Mr. Obama’s financial regulation plan provides them with little incentive to remain on their best behavior.  It is important that Mr. Obama not sacrifice the economy in favor of the other big ticket, and vitally important, items on his agenda.

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