Friday, February 19, 2010

Stimulus Package Success?

I've heard arguments saying, in effect, of course the GDP would go up if the government puts almost $800 billion into the economy. So I looked up how much money the government has actually put into the economy so far through the Recovery Act. Revovery.gov indicates about $57 billion has been sent out. That is way less than I expected. Since some recipients might spend the money before they actually receive it, we can use the high extreme of total funds awarded, or $197 billion.

In real dollars, the GDP increased $91 billion in the 3rd quarter and $221 billion in the 4th quarter.

This graph shows quarter to quarter GDP growth trending down from 1st quarter 2008 to 2nd quarter 2009, and going up coinciding with the stimulus package. Post hoc aside, it appears the economy grew more than the amount spent through the Recovery Act. After a year of negative growth, I'm tentatively convinced that the stimulus package achieved positive results if GDP is an accurate metric. I feel this way because consumer confidence is so vital to the economy. A growing GDP spurs confidence, which I think outweighs future debt concerns (I do not mean all debt concerns; I am only talking about the ramifications of this particular stimulus spending). Consumer confidence was at an all time low (since 1967) in February 09 at 25. It is now at 56. While it is foolish to confidently proclaim success for such a large program this early, it appears to be working.

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