- The Washington Times - Thursday, May 21, 2009



The biggest unasked question in today’s economy is whether it has started turning around before President Obama’s spending stimulus program has gotten fully under way.

There is growing evidence that the U.S. economy is showing signs of life amid increasing reports that Mr. Obama’s $800 billion economic stimulus is trickling into the economy at an ever-slower pace.

We’ve had two back-to-back months of increased sales of existing homes. Banks are making a comeback, as the administration’s stress tests largely acknowledged. Bank of America’s stock increased by nearly 10 percent Monday after a favorable recommendation from Goldman Sachs, as did other financial equities.

Bank deposits are up and mortgage loans are rising, suggesting that credit has begun flowing again, and we are seeing an uptick in construction.

This week, the National Association of Home Builders issued a report saying builders’ confidence in the market for new homes climbed for the second straight month. David Crowe, NAHB’s chief economist, said the renewed confidence “indicates that homebuilders feel we’re at or near the bottom of the market.” The decline in housing prices appears to be slowing, too.

Consumer confidence is rising as well, though retail sales remain sluggish, and unemployment, at 8.9 percent, continues to rise. The signs suggest the economy clearly has begun bottoming out.

Federal Reserve Chairman Ben S. Bernanke, who has been the unsung hero in the Fed’s heavy lifting in this recovery, predicted as much.

“We continue to expect economic activity to bottom out, then to turn up later this year,” he told lawmakers earlier this month. “The pace of contraction may be slowing.”

The White House maintains, of course, that all of this is the result of the administration’s economic stimulus and its other recovery policies.

However, there are reports to the contrary that suggest the flow of infrastructure spending to the states has been slow and that much of the critical decision-making at the U.S. Treasury has been on hold because of bureaucratic mistakes, White House micromanaging and unfilled job slots in key positions.

Late last month, the Government Accountability Office (GAO) released a report on Mr. Obama’s infrastructure spending that estimated that just $49 billion of the nearly $300 billion being sent to the states would be spent by the end of fiscal 2009.

The report, said spokesman Brendan Buck of the House Republican Study Committee, “reveals that stimulus dollars are mired in typical glacial bureaucratic processes.”

Among the GAO’s findings on the stimulus act’s Highway Infrastructure Investment spending: Just “two of the 16 states [studied] had agreements [with the Department of Transportation] covering more than 50 percent of their states’ apportioned funds, and three states did not have agreements on any projects.”

In a Page One article last week, the New York Times elaborated on the GAO’s findings under the headline “Stimulus Aid Trickles Out, but States Seek Quicker Relief.”

The Times’ findings: “Nearly three months after President Obama approved a $787 billion economic stimulus package, intended to create or save jobs, the federal government has paid out less than 6 percent of the money, largely in the form of social service payments to states.”

While the White House and the president say the program is right on track and creating jobs, “they have actually spent relatively little so far,” the Times said.

Over at Treasury, decision-making has slowed to a crawl or been delayed altogether. Treasury Secretary Timothy F. Geithner and the White House have made dramatic proposals, but “carrying out those policies has bogged down because critical decisions about how to do so aren’t being made,” The Washington Post’s David Cho reported Monday. Nearly four months into Mr. Obama’s presidency, the department is without a deputy secretary, and other top people are missing from its senior ranks.

The result: After the announcement of a plan to relieve banks of toxic assets, it isn’t clear who will carry out the plan’s details. After the announcement in March of a $15 billion plan to open up credit for small businesses, “it is still struggling to get off the ground” after officials said it would not work.

The trouble is as much Mr. Geithner’s inability to manage a bureaucracy as large as Treasury as it is the White House’s propensity to micromanage all its decision-making - right down to the design of the department’s Web site. Meantime, the economy seems to be struggling to make a comeback of its own as some economists are suggesting maybe much of Mr. Obama’s stimulus spending plan isn’t needed.

I asked American Enterprise Institute economist Kevin Hassett whether he thought a lot of the stimulus spending may come too late and may not be needed. He replied, “You raise a good point; if the third quarter starts out strong after a good second quarter, then we might well have too much stimulus.”

Nevertheless, the political reality is that if the economy begins to improve in the second half of this year, as many predict, the administration will claim its stimulus spending caused the improvement - even when very little has been spent.

Donald Lambro is chief political correspondent of The Washington Times.

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