All Blog Posts from Econwatch

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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While ambling around the Bureau of Labor Statistics site (a fantastic trove of information), I stumbled upon a Consumer Expenditure Survey that details how Americans spent their 2008 Economic Stimulus Payments, which were actually IRS tax rebates.

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This post by James Picerno originally appeared on CBS MoneyWatch.com.

In February, President Obama signed the massive $787 billion stimulus bill into law with the idea of jump-starting the economy with spending on everything from tax cuts to new highways to programs to increase energy efficiency. The size and specifics of the package-and even whether it was necessary at all-were hotly debated, and the resulting bill was supported by only three Republicans in the Senate. Seven months later, what can be said about whether the stimulus package has worked or not?


The answer is that at least some of the spending has goosed the economy. But it's a tricky business to assign credit-if a start-up hires six people, was it the entrepreneur's vision or the government grant that was responsible? And the jury's still out on all the stimulus money that hasn't even been spent yet.

In many ways, the Cash for Clunkers program, which offered rebates of up to $4,500 to consumers for upgrading to new, more fuel-efficient cars, exemplifies the debate over the effectiveness of stimulus spending. The program disbursed $2.9 billion in rebates, spurring the purchase of close to 700,000 new cars and giving a much-needed boost to the faltering auto industry. Critics accurately point out that many of those purchases would have been made anyway in the future, without taxpayer subsidies. But one of the primary goals of stimulus spending is to get people spending money now, while the economy is hurting, and Cash for Clunkers certainly did that. (See our earlier story, "Did Cash for Clunkers Really Work?")

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Nearly half of the states in the nation are missing out on more than $3.1 billion in stimulus funds available to assist the unemployed because they have not met the requirements necessary to qualify for the federal aid, USA Today reports.

Labor Department records indicate that 23 states have failed to meet federal requirements for the extra money, the newspaper reports. The National Employment Law Project (NELP) estimates nearly 350,000 unemployed Americans could be benefiting from that money.

The Obama administration has dictated, USA Today reports, that states may receive a third of the unemployment funds they are eligible for after relaxing rules that say for how long a person must be unemployed in order to get benefits. The rest of the money becomes available after a state provides extra money for workers' dependents, part-time workers, people in training programs and for those who quit their jobs because of "compelling family circumstances."

Unemployment claims fell nationwide last week, providing evidence that fewer jobs are being slashed from the economy. In July, the unemployment rate dipped to 9.4 percent, its first decline in 15 months. Still, some economists predict unemployment may not return to healthy levels until 2013.

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As folks in Washington and the rest of the country grumble about the depressed job market and underwhelming consumer spending reports, the calls for a second stimulus continue.

"I think that a second one may well be called for," Warren Buffett , the widely respected investor, said Thursday morning on ABC's "Good Morning America."

"Our first stimulus bill... was sort of like taking half a tablet of Viagra and having also a bunch of candy mixed in," he said, "as if everybody was putting in enough for their own constituents."

Indeed, new reports show the money from President Obama's $787 billion economic stimulus package is potentially being doled out unevenly. An analysis from the New York Times shows rural areas are receiving a disproportionate amount of funds for transportation projects.

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CBS Evening News' Nancy Cordes reported Wednesday on a House oversight committee hearing on President Obama's economic stimulus package. The hearing comes after a report showed that the stimulus funds are being used for day-to-day operations in many states and not reaching the poor and jobless areas that need them most.

Some Democrats are talking about seeking a second stimulus even as the defend the first, but Republicans are staunchly opposed. CBS Moneywatch.com editor-at-large Jill Schlesinger joined Evening News anchor Katie Couric to discuss the possibility of a second stimulus and more.

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Members from The Cato Institute, a libertarian think tank, meet for an annual Policy Preferences Seminar. Economics, the Obama Stimulus Plan and the Federal Reserve are topics of discussion.

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One of the biggest problems in understanding today's economic conditions is figuring out how to place the Bush-Obama bailouts in proper perspective.

Comparisons with the Great Depression have become commonplace. Occasionally, for variety, we're told that the Panic of 1873 is relevant, or that the stagflation of the 1970s may have lessons to impart today.

Then there's Japan's circa-1990 crash and extensive experimentation with deficit spending and public works "stimulus," which ultimately left the Nikkei 225 average at less than one-quarter of its all-time low: 8,700 as of early Tuesday, down from an all-time high approaching 40,000 a generation ago.

The chart above may give a better way to evaluate today's situation. It shows that during the 1929-to-1933 phase of the Great Depression, the decline in real GDP -- the nation's overall economic activity -- was a remarkable 27 percent. The government's efforts to stimulate a recovery, adding up actions by the Federal Reserve and the U.S. Congress, totaled 8.3 percent of GDP.

No other U.S. economic decline since has come close to exacting that amount of pain. Not one even leapt into a double-digit GDP decline. During the stagflation era, the 16-month recession starting in November 1973 led only to a 3.1 percent decline in real GDP.

Compared to the Great Depression, that's just a rounding error.

Today, the recession (or, perhaps, Lesser Depression) that started in December 2007 has caused a decline in real GDP of only 1.8 percent. But the Obama and Bush administrations have spent an astounding 29.9 percent of GDP, at the very least, making this an extraordinarily expensive stimulus.

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Days after GM's CEO Rick Wagoner was forced out by the Obama administration, Treasury Secretary Timothy Geithner left open the possibility that such moves could happen again.

In an interview with CBS Evening News anchor Katie Couric, Geithner acknowledged the government has had to do "exceptional things" – citing AIG as well as Fannie and Freddie Mac.

"We have changed management aboard," he said. "And where we've done that, we've done it because we thought that was necessary to make sure these institutions emerge stronger in the future."

When asked if he would leave open the option to pressure a bank CEO to resign, Geithner replied: "Of course."

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The fine print in the stimulus bill authorizing the AIG bonuses, which was rushed through the U.S. Congress at lightning speed, has led to a renewed call for politicians to read legislation before they vote on it.

That kind of rule may seem like plain common sense, but it's surprisingly common for members of Congress to be handed a bill that's hundreds or thousands of pages long -- and have only a few hours to read it before a vote. In other words, legislators may approve complex and important measures even though they may not know what they're actually voting on.

Jim Babka, executive director of a non-profit, non-partisan group called Downsize DC, says the AIG-bonus flap has prompted more interest in a project he's been advocating called Read the Bills Act.

"When they were debating the stimulus bill, Republicans found that this was their most effective talking point," Babka said in an interview on Wednesday. "The way we've written the Read the Bills act, it would cause Congress to slow down and pass smaller bills."

The Read the Bills Act is as simple to describe as it will be difficult for Babka and his allies to enact. A draft they've prepared says that each bill must be read aloud before a quorum in the Senate and House of Representatives; that each legislator voting "aye" must file an affidavit saying they're familiar with the contents; and that laws that don't meet these requirements can be challenged in court.

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A construction worker from Queens, New York used Bernie Madoff's prison number to play the lottery and won $1,500, reports The New York Daily News.

Ralph Amendolaro, 50, noticed the digits under Madoff's mug on the front page of the Daily News the day after he pleaded guilty - 61727-054. He stopped at a corner store near his home on March 13 and played last three digits in New York State's "Numbers" lottery game.

His earnings -- which may be more than Madoff's other investors get these days -- was a $1,500 prize for $9 spent. That's a 16,000% return -- better than even what Madoff had promised.

Amendolaro told The Daily News he planned to hand a chunk of the cash over to his wife for a 50th birthday trip to Las Vegas with friends. He said he doubted that Madoff would be happy with his role in Amendolaro's good fortune.

"He'll probably want a cut."