Economic Perspective for Victims of ODS

I get more than little weary of the constant harping from the nattering nabobs of negativity about the failure of the economic stimulus package which is proven by, in their narrow, ill-informed minds, the still-rising unemployment rate. Their favorite moan being that President Obama "promised" that the unemployment rate wouldn't top 8% if the stimulus were passed, it's now in excess of 10%, therefore the stimulus is a failure. A few salient points, which I don't expect to be accepted by those who would rather not have facts interfere with their ODS, but here goes:

When he took office in January of this year, President Obama was handed an economy in a condition not seen in this country since the 1930's (thanks, GeeDubya). The financial system was on the verge of collapse and the credit markets were frozen. Job one was to stop the hemorrhaging and get credit flowing again. I don't recall any economist saying they knew exactly what to expect and exactly what the solutions were. One thing most agreed on was that government spending was necessary. In fact many prominent economists, Nobel Prize winner Paul Krugman among them, urged more spending than what the president proposed.   

Let's take a look at what's happened since the stimulus passed in February, according to the Wall Street Journal (that librul rag):

"Government efforts to funnel hundreds of billions of dollars into the U.S. economy appear to be helping the U.S. climb out of the worst recession in decades.

The U.S. economy is beginning to show signs of improvement, with many economists asserting the worst is past and data pointing to stronger-than-expected growth. On Tuesday, data showed manufacturing grew in August for the first time in more than a year. "There's a method to the madness. We're getting out of this," said Brian Bethune, chief U.S. financial economist at IHS Global Insight.

Much of the stimulus spending is just beginning to trickle through the economy, with spending expected to peak sometime later this year or in early 2010. The government has funneled about $60 billion of the $288 billion in promised tax cuts to U.S. households, while about $84 billion of the $499 billion in spending has been paid. About $200 billion has been promised to certain projects, such as infrastructure and energy projects.

Economists say the money out the door -- combined with the expectation of additional funds flowing soon -- is fueling growth above where it would have been without any government action.

Many forecasters say stimulus spending is adding two to three percentage points to economic growth in the second and third quarters, when measured at an annual rate. The impact in the second quarter, calculated by analyzing how the extra funds flowing into the economy boost consumption, investment and spending, helped slow the rate of decline and will lay the groundwork for positive growth in the third quarter -- something that seemed almost implausible just a few months ago."

And about that unemployment number, it's going to require something Americans are short of in our instant gratification society--patience. From CNN Money:

"The consensus forecast is that job losses will continue through the end of this year, with many economists not expecting unemployment to peak until next summer...Even with Thursday's report that showed the economy grew at a 3.5% annual rate in the third quarter, the continued job losses are not a shock...Jobs are what are known as a trailing or lagging indicator, meaning that they change in response to other economic events, rather than predicting changes the way a leading indicator, such as the stock market, does. That's because even after a recession has ended, employers are slow to add staff until they're sure that demand has returned.

It took almost two years after the end of the 2001 recession before the economy started adding jobs on a consistent basis. And it wasn't until February 2005 until the job market got back to the employment levels of four years earlier."

That timeline of the gap between the end of a recession and the fall of unemployment is consistent with the history of recession and recovery. In the recession of the early 1980's, which ended in November of '82, unemployment reached its peak of 10.8% in December of that year and it took nearly 2 years, until November of '84 for it to fall to 7.2%

A little political side note to go with that for all those who assume that the current economic conditions assure that Obama will be a one-term president. In January of 1983, with unemployment at its peak, Ronald Reagan's approval rating stood at 35%. In November of '84 Reagan was re-elected in a landslide.