The recent spate of claims that the recession is about to be "over" -- only "over" in the strictest technical sense, as several leading indicators, including GDP, are expected to turn around this quarter -- has led to more skepticism of the stimulus on the right. Jon Henke tweets that "the recession is over...but only 12% of the stimulus has been spent" and links to these headlines. If both of those things are true, why not halt the stimulus? Because the stimulus is the driving force behind what limited recovery we've seen, according to economists Dean Baker and Josh Bivens (as well as Alan Blinder). Without the stimulus, the economy won't grow in either this or the next quarter -- those assessments Henke quotes are predicated on the idea that the full stimulus package will run its course. Both consumer spending and private investment are still declining (though both indicies fell a little bit less than in the first quarter), continuing to leave the government's efforts to fill the gap as the primary source of economic improvement. Cancelling that spending now would lead to an economic contraction by taking approximately $30 billion a month out of the economy. The other problem is that Henke is confusing the technical recesion with the real one. Even once leading indicators turn around, unemployment is going to be a serious problem going forward -- it's unlikely to fall back to normal levels until 2013 or 2014. Even if GDP would turn around without the stimulus -- and it wouldn't, at least not for some time -- we also have the prospect of a jobless recovery. Since the most important measure of the real economy is whether people can get good jobs and keep them, taking away the stimulus that is bolstering job growth would be a ridiculous idea.
-- Tim Fernholz
