From today's Washington Post:
Economists began calling for a $75 billion to $100 billion package of tax cuts and spending increases in the weeks that followed the Sept. 11 terrorist attacks, when the economy looked like it was in a free fall. Estimates were that such a package could add as much as a full percentage point to the economy's growth rate in the ensuing 12 months, boosting private payrolls by nearly a million jobs. Just the talk of enacting a stimulus package appeared to boost consumer and investor confidence.
Since then, however, the economy has pulled out of its nose dive, dissipating the sense of urgency for Congress to do something. Many forecasters now predict that the economy will begin recovering on its own during the first three months of next year, before any fiscal stimulus could have had an impact on the economy.
As a result of these more upbeat assessments, many of the economists who once attached great importance to a fiscal stimulus package now estimate it would have added only half a percentage point to economic growth and boosted private payrolls by a more modest 300,000 jobs.
"At this point I don't think it's a big enough even to start pushing the numbers around," said one of them, Bruce Kassman, chief U.S. economist at J.P. Morgan Chase & Co. "There are a lot of unknowns and changes in other aspects of the economy that are of equal magnitude."
Apparently Wall Street also shares that view. Even as word spread of the breakdown in talks at the Capitol, stock prices ended the day mixed, with trading driven by other news. Prices of Treasury bonds rose, and their yields fell, as investors concluded that the failure to pass a stimulus bill means the federal government will borrow less in coming years, offering fewer new bonds for sale. Indeed, stimulus skeptics have recently argued that the lower interest rates that result from less federal borrowing will do more to help the economy than a package of tax cuts and spending increases.
As David Wyss, chief economist at Standard & Poor's Corp., sees it, the stimulus package was really more an insurance policy for the economy, protecting against a risk of deeper recession. While he would still prefer to have that insurance, he said it now doesn't seem as essential as it once did.
"I'm a little less nervous about the economy than I was two months ago," he said.
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