Summer Spend-a-thon

The Obama White House has indicated that 600,000 jobs will be created this summer by ramping up stimulus spending.

The new summer strategy is aimed to quiet Republican criticism of the February stimulus.  Republicans charge that unemployment has continued to grow,  reaching a new high in May.

The Obama strategy is counterintuitive.  Many economists believe the trough of the recession was reached in mid March.  Though aggregate unemployment numbers are the highest in roughly 30 years, May’s unemployment statistics were lower than April’s.  This would indicate that the recession is easing, especially considering that employment is a lagging variable in economic calculations.

Why then, should we spend more?  If the economy is already showing signs of recovery what is to be gained by speeding up the pace of stimulus spending?  The answer is political advantage.  Only a small portion of the stimulus funds have actually been spent.  American voters have a notoriously short memory and many do not understand economic theory.  When things get better, it is easy to assume that the incumbent president and legislature are responsible.  It is sound political strategy to keep spending making any gains appear to be caused by the Democrat’s stimulus bill.  Therefore, the current administration wants to get as many funds out the door as possible.

The numbers do not add up.  The economy has started to improve, few stimulus funds have been spent, and the jobs the Obama administration promised during the campaign are failing to materialize–150,000 jobs created since February.

Wise policy would be to continue to spend at the same rate–or even slow down!– and if the economy recovers in the next few months, refund the money, or save it!


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