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“Economic stimulus” stimulating enough?

The results of a survey from the National Association for Business Economics shows forecasters are not united on what might…

By Faiza Zia Khan , in The big bailout: Media coverage of the financial meltdown , on March 1, 2009 Tags: , , , , , , ,

The results of a survey from the National Association for Business Economics shows forecasters are not united on what might be best way to revive the economy.

The $787 billion economic stimulus package signed into law by President Barack Obama will have only a “modest impact in shortening the recession,” a survey of economists showed.

Just over 60 percent of those polled in the semiannual National Association of Business Economists Economic Policy Survey said the plan will have a “modest” impact. About 29 percent said it would have little or no effect.

From what I can observe this is the beginning of a perfect storm in a tea cup.

Obama signed the legislation Feb. 17. It includes tax cuts for most U.S. families and allocates billions of dollars for public works projects and creating or saving 3.5 million jobs. The administration also has proposed spending on a new bank- rescue plan and an effort to limit home foreclosures.

The Commerce Department said the fastest rate of decline since 1982 has been the shrinking of the U.S. economy at a 6.2 percent annual pace in the fourth quarter of 2008.

A hefty 70 percent majority of survey respondents said the government should establish a “bad bank” to hold toxic assets of financial institutions. With the same ratio, respondents favor making banks’ acceptance of funds from the Troubled Asset Relief Program contingent on losses for current equity holders.

Business economists believe the government could successfully nationalize one bank without nationalizing the entire banking system, and could successfully privatize the system after nationalizing it. However, less than half thought such action would restore the flow of credit or speed an economic turnaround.

Most economists thought the dollar’s recent rise against the Euro had been due to short-term, safe-haven flows spurred by panic over the crisis and the uncertain outlook for the world economy.

I think if the plan gets wings it might just fly.

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