WASHINGTON -- President Obama's top economic adviser, Lawrence H. Summers, acknowledged in a speech on Friday that unemployment and job losses were higher than the administration projected and would rise further this year even as the economy showed signs of recovery. "This is obviously a major area of concern," he said. But Mr. Summers, defending the president's $787 billion stimulus package of last February against recent criticism from Republicans and some analysts, said rising job losses were "not a basis for concluding that the recovery act is falling short of its goals."The White House adviser said the two-year stimulus plan of tax cuts and new spending was timed to peak during 2010, with 70 percent of its benefits to be distributed to local governments, businesses and families in the first 18 months. "We are on track to meet that timeline," he said.Mr. Summers, in what the White House billed as "a progress report" on rescuing the economy, pointed out that other independent forecasters also underestimated job losses. He said no one knew for sure why employers had shed so many workers in this downturn. But he suggested several factors: greater productivity that allowed firms to do the same work with fewer workers, bigger financial pressures on companies, and employers' expectations of a prolonged recession.
WASHINGTON -- President Obama's top economic adviser, Lawrence H. Summers, acknowledged in a speech on Friday that unemployment and job losses were higher than the administration projected and would rise further this year even as the economy showed signs of recovery.
"This is obviously a major area of concern," he said. But Mr. Summers, defending the president's $787 billion stimulus package of last February against recent criticism from Republicans and some analysts, said rising job losses were "not a basis for concluding that the recovery act is falling short of its goals."
The White House adviser said the two-year stimulus plan of tax cuts and new spending was timed to peak during 2010, with 70 percent of its benefits to be distributed to local governments, businesses and families in the first 18 months. "We are on track to meet that timeline," he said.
Mr. Summers, in what the White House billed as "a progress report" on rescuing the economy, pointed out that other independent forecasters also underestimated job losses. He said no one knew for sure why employers had shed so many workers in this downturn. But he suggested several factors: greater productivity that allowed firms to do the same work with fewer workers, bigger financial pressures on companies, and employers' expectations of a prolonged recession.
The speech Larry Summers gave at the IIE was sensible and clear-headed. But his discussion of the stimulus and its size was disappointing -- and, I hope, somewhat disingenuous. What Larry said: The size of the stimulus reflected a balance of several considerations: the size of the likely output gap that the economy was facing, the difficulties of ramping up spending and then ramping it back down after recovery in a high budget-deficit environment, the question of how much could be spent both quickly and productively, and the recognition that the Recovery Act was just one of several initiatives by the Administration that would have a dynamic impact on the state of the economy. Look: it was really clear, even in January, that the stimulus wasn't remotely big enough to close the output gap. My analysis at the time here and here. [...] The point is that I can respect the argument that this was all the administration could do, politically. I can't feel equal respect for the argument that this was all it should have done, economically.
The speech Larry Summers gave at the IIE was sensible and clear-headed. But his discussion of the stimulus and its size was disappointing -- and, I hope, somewhat disingenuous.
What Larry said:
The size of the stimulus reflected a balance of several considerations: the size of the likely output gap that the economy was facing, the difficulties of ramping up spending and then ramping it back down after recovery in a high budget-deficit environment, the question of how much could be spent both quickly and productively, and the recognition that the Recovery Act was just one of several initiatives by the Administration that would have a dynamic impact on the state of the economy.
Look: it was really clear, even in January, that the stimulus wasn't remotely big enough to close the output gap. My analysis at the time here and here.
[...]
The point is that I can respect the argument that this was all the administration could do, politically. I can't feel equal respect for the argument that this was all it should have done, economically.
Consider also that a new administration began Jan 20th and many staffers still don't have desks in July. To expect much more in such a short time is too much.
I think everyone expected a further "stimulus" and it was basically implied at the time of passage. In February it was important to pass something, to get the ball rolling, the concept sold and the congressional machine oiled. As Obama checks major policy goals off his list each month (healthcare coming up, looking promising) his power increases. One lesson from the Clinton admin was to make sure to do things in the correct order, this is a lesson the Obama admin has been all over.
If Obama can get the public-option healthcare bill through, which seems fairly likely at the moment, he will be sitting on a ton of political capital and popular goodwill. All it will take now for a real stimulus package (that actually does something other than spread cash about) will be a return to the economic shocks of last September/October. Rumors and expectations I'm seeing time that for the end of August so expect the stimulus talk to heat up in that time frame.
