Will Their be Appetite for Another Stimulus Plan?

Posted on Thursday, November 12, 2009

Calculated Risk has a nice post detailing the Possible Upside Surprises, Downside Risks going forward. One area [frequently] mentioned is that only 1/3 of the fiscal stimulus has been spent to date. Below are the details how the ~$180 billion fiscal stimulus has been spent.



But while the impact of the stimulus has been HUGE (Mark Zandi, Chief Economist of Moody's Economy.com estimates the stimulus contributed ~3% to Q2 '09 GDP and 3.5% to Q3 '09 GDP before the Joint Economic Committee), much of the impact is now fading (a vast amount of the impact was due to pulling demand forward). Calculated Risk details the potential drag and the why there may be appetite for an additional stimulus plan in 2010:

This suggests that all the growth in Q3 was due to the stimulus package, and the impact will now wane - only 2% in Q4, and 1.5% in Q1 2010 - and then the package will be a drag on the economy in the 2nd half of 2010.

With unemployment above 10%, there will be significant political pressure for another stimulus package - especially if the economy starts to slow in the first half of 2010. This next package could be several hundred billion (maybe $500 billion) and could increase GDP growth in 2010 above my forecast.

Jake 12 Nov, 2009

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Source: http://econompicdata.blogspot.com/2009/11/will-their-be-appetite-for-another.html
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