Federal Spending Helping Ease Recession?
Sharp Rise in Federal Spending May Have Helped Ease Recession
By LOUIS UCHITELLE
nytimes.com
hen a bitterly divided Congress failed to pass an economic stimulus bill last fall, many predicted the recession would only worsen. But while few were paying attention, government spending surpassed the amounts envisioned in the stimulus measure, exceeding what even the most vociferous advocates wanted.
The unexpected surge — along with the remarkable strength in consumer spending — helps to explain why the recession, to nearly everyone's surprise, has been so mild and may be ending.
The mood was much different last fall. Anticipating harder times, Democrats and Republicans pushed for an additional $80 billion to $100 billion in federal outlays. While they agreed on this goal, they deadlocked over how to allocate the money. Democrats wanted the government to spend nearly all of the money, while the Republicans emphasized new tax breaks for business and consumers, not outright spending.
Despite the bill's failure — a severely watered-down version finally passed this month — government outlays rose sharply in response to dozens of uncoordinated decisions and fortuitous windfalls. The surge, which started in October, has continued into this month at a rate of more than $100 billion, new government data suggest. And income tax cuts that went into effect at the beginning of this year are expected to provide a further lift to the economy.
"You can reasonably argue that the recession, which seems to have ended, came to an end because of aggressive government spending," said Mark M. Zandi, chief economist at Economy.com, a forecasting and data gathering firm. |
