The Need to Spend Stimulus Dollars Faster

The Republicans are hitting the administration hard over the 9.4% unemployment figure announced this morning and evidently the administration is taking note.

Vice President Biden announced today that they would be speeding up implementation of the stimulus program. The aim is evidently to get more money out the door throughout the summer.

The administration is obviously trying to get out of a box that it sees forming around its stimulus plan. To date only something on the order of $40 billion of the $780 billion stimulus bill is out the door yet the economy is showing signs of picking up or not getting much worse. If trends continue as they have for the past few months then there might be something on the order of a mild recovery underway by the third quarter.

The box, of course, is that unless the stimulus money gets out there quickly — remember the bulk of it isn’t scheduled to hit until 2010 and 2011 — the administration may well find itself in the middle of an economic recovery with lots of money yet to be spent. That’s a problem for two reasons. One, they can’t claim as much credit as they would like and two, pressures are going to build to not spend the money either because it would potentially overheat things or because it isn’t needed and therefore is no need to go so far into debt.

The only way out is either to have the recovery falter — no good– or to speed up spending. The problem there is that you risk really losing administrative control of the funds and a lot of bad press if it looks like the money is being wasted.

All one can do at this point is engage in conjecture but assuming that the recovery did really take hold later this year, the pressure as well as logic of backing off on stimulus is going to increase. That will put some pet Obama initiatives in peril so look for this to potentially become a big issue late this Fall.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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