Dean:

Not arguing; just asking . . . If most of the impact has already been felt, why did Bernstein/Romer's graph comparing unemployment rates with and without stimulus (the one used by Krugman http://krugman.blogs.nytimes.com/2009/07/05/bruce-bartlett-misstates-the-problem/) show the impact on unemployment just kicking in around now?

"... The remaining funds are projected to be spent out at an $80 billion annual rate over the course of 2010."

That is so inadequate it's astounding.

Here in the NW suburbs of Chicago there are many hundred houses listed for sale with asking prices above $600k. So far this year, only a handful have sold in that price range. As the only people listing homes in that bracket are those that people really need to sell, and most of those on the market have been there two years or more (the majority vacant), it's likely they'll be going back to the banks when this year's "peak selling season" ends with them still unsold. Even 20+% price reductions haven't moved them. I'm sure this is not a situation unique to the Chicago suburbs.

The side effects of this will further crush the real estate price structure, subtracting trillions nationwide from households' nominal net worth. That will give further impetus to the rebound of the national savings rate, which I predict will overshoot the old average of circa 8% to record highs. There will be no return to the status quo ante of ever-rising consumer debt.

President Obama's economic advisors are predicting that the recession will come to an end sometime this year, as fiscal stimulus spending kicks into high gear. But the conditions for an economic recovery have not been laid.
State and local governments across the nation, who are unwittingly pulling the rug out from under the federal government and thwarting any chance for a sustainable recovery by 2010.

Read more here:
http://neweconomicperspectives.blogspot.com/2009/06/why-stimulus-isnt-working.html

Dean,

All I can say is wow! You just accused Paul Krugman of missing the housing bubble and Not understanding arithmetic. I think if you give him a call, he will tell you that while he agrees that the current fiscal stimulus is too small, he will disagree with you that "the economy has already felt the bulk of its impact."

Perhaps your forgetting the multiplier effect? Tax cuts have a lower multiplier than the still to come infrastructure spending?

i doubt baker is accusing paul krugman of not knowing arithmetic since on all the major issues krugman and baker are in agreement and the two often point to the other as having "also predicted the recession"

SARAH PALIN and Douglas Feith will seize the WHITE HOUSE again for the LIKUD GOP ...... AIPAC , JINSA and FOX NEWS are pushing AMNESIA TEA PARTIES to push myopia on the BUSH / CHENEY / MUKASEY / PAULSEN / Richard Perle / PAUL WOLFOWITZ / Gene Moss / NEKRITZ POLANSKI / JONATHAN POLLARD MOMBACH are telling everyone that OBAMA did not inherit the current GOP RECESSION and unnecessary wars ........ the PALIN / MARRA GOP insists that the USA must remain a CLIENT STATE OF ISRAEL ........ Remmember the LAVON AFFAIR , THE USS LIBERTY and the FIVE DANCING ISRAELI LUYSTERS .

There is a difference between economic growth rates and unemployment. The economy usually has to turn around before unemployment can fall. Unemployment is a "lagging indicator".

Tax cuts are almost worthless for domestic job creation unless they are specifically linked. Tax cuts are leaky, especially in a mechanized and global economy where tax cuts can be invested in machines that replace labor and off shoring production to foreign workers.

It is time for Congress to knock off the "stimulus" BS and enact a program to create domestic jobs.

Max,

Krugman made the same point that I did, saying that the stimulus was not large enough and that the economy will need a further boost.

I have differed with Krugman on occasion, but that is the exception. He is a great economist and he certainly has gotten most of the story right both on the housing bubble and the recession.

Dean,

I agree with you about Krugman and know you guys usually agree. That is why I was surprised to read your words.....

"The economists who missed the housing bubble seem to be having a hard time understanding the timing of the stimulus. While the vast majority of the money has not yet been spent, the economy has already felt the bulk of its impact."

Krugman recently wrote about how the Republicans are wrong to crtiicize Obama by saying the fiscal stimulus has failed. The package was designed to have maximum impact in Q3 09 to Q2 10.

Yes, Krugman agrees with you on the size of the whole stimulus program but he disagrees with you about when the maximum impact is supposed to be felt.

So I was curious as to why you thought that the small amount of money spent so far will have less impact than the much larger amounts coming by the end of the year?

Another thing that "economists who know arithmetic" understand, is that growth per se is unsustainable. If they took themselves seriously they would be spending most of their time developing economic mechanisms that had some other basis.

Tonight [o8 July] on NBC Nightly News Brian Williams & Lisa Myers each stated that the stimulus cost $787 billion. In a long story [for network TV, maybe four minutes] on the small impact to date of the stimulus, neither Williams nor Myers mentioned the fact that about 60% of the "stimulus" was tax cuts & other non-spending programs.