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CBO Rains on Obama Parade

The president is “upbeat” about the economy these days, but increasingly others who can hardly be characterized as partisan critics are casting doubt on the impact of the stimulus and the outlook for recovery. This report explains:

The CBO report found that through April only about $19 billion in stimulus funds has been spent.

In addition, [Douglas] Elmendorf predicted, unemployment is expected to peak at 10.5 percent in the second half of next year. Last month’s rate was 8.9 percent, up from 8.1 percent in February, when the stimulus became law. The number of unemployed increased by 1.26 million during the past two months to 13.7 million.

The administration’s report Wednesday was nonetheless upbeat, maintaining that in the past 100 days, “We have obligated more than $112 billion, created more than 150,000 jobs and helped communities and tribes in every state and territory.”

[. . .]

Now, Elmendorf said, the economy has weakened to the point that, “If we were writing down a new forecast today, we would go off that peak and we would raise it. Currently, we expect the unemployment rate might peak around 10.5 percent in the second half of next year.”

Worse, he warned, “The recovery will falter in 2010 if private sector demand for goods and services doesn’t accelerate to offset the diminishing federal stimulus.”

If the CBO is right, does Obama declare his own stimulus plan a failure and ask for a second one? Or do the unlucky Democrats running in 2010 just have to buck up and face the voters? I suspect that Congress will find it hard to justify yet another Keynesian boondoggle after earlier attempts by both George W. Bush and Obama failed. And, after all, Obama himself has told us the already accumulated debt is “unsustainable.” Perhaps the same can be said for  Obama’s economic approach.



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