The government's economic stimulus spending has already had its biggest impact and probably won't contribute to significant growth next year, a top White House adviser said Thursday. Christina Romer, the chair of President Barack Obama's Council of Economic Advisers, said the initial jolt of the $787 billion stimulus expanded the economy in the second and third quarters of this year. But she said the remaining spending will simply keep the economy from slipping. "By mid-2010," she said, "fiscal stimulus will likely be contributing little to further growth." That assessment underscored the fragility of an economic recovery marked by stubbornly high unemployment. Romer said the government has already spent $194 billion of the total stimulus package, most of it in tax cuts, aid to states and unemployment and food stamps. In addition, she said, $146 billion of spending had been already obligated. Romer, testifying before Congress' Joint Economic Committee, said that as of August the stimulus had created or saved 600,000 to 1.5 million jobs. She said a premature end to the stimulus would be "misguided." "This is not a normal recovery," she said. "Coming out of this, we've got lots of things working against us," she said. Unemployment will remain high, at or above 9.6 percent, through the end of 2010, Romer predicted. "While job losses will likely end early next year, robust job gains may still be several quarters away," she said. The pace of the recovery and the unyielding jobless numbers pose significant political and policy problems for the president and for congressional Democrats who face midterm elections next year. The administration and Congress are confronting competing demands to spend more money to create additional jobs and a desire to confront rising deficits and a burgeoning national debt. Republicans were skeptical of Romer's claims of stimulus success. Continued... |