Stimulus Report Card: Is It the Right Fix?
Economists grade Obama's package on its ability to stimulate economic activity.
Jan. 28, 2009— -- It's not just politicians who are arguing over the particulars of the $819 billion economic stimulus bill on Capitol Hill.
Economists are engaged in their own debate about which parts of President Obama's economic package are really stimulative, which are social policy and which will swiftly create jobs and encourage spending.
"I think it's very, very hard to get it exactly right," said economist Rosanne Altshuler, co-director of the Urban-Brookings Tax Policy Center.
Experts say that you need a combination of carefully timed tax cuts and spending programs to truly stimulate the economy.
"You want the bill to have a sustainable impact," said former Federal Reserve Governor Laurence Meyer. "You'd like some of it to come in very quickly, but you don't want it to die out very quickly."
The problems ailing the economy -- the housing crisis, the credit squeeze, deflated consumer spending -- call for different cures. President Obama's plan offers a wide variety, such as highway construction, renewable energy projects and small business tax credits.
But not all spending is created equal. So ABC News asked three economists -- Meyer, Altshuler and Moody's Economy.com's Mark Zandi -- to grade parts of the package solely on their ability to stimulate economic activity.
The bill allocates $54 billion towards increasing food stamps and extending unemployment benefits. Everyone on the panel gave that an "A."
"That is money that comes quickly into the system and is mostly spent," said Meyer. "That is a perfect example of an effective short-term stimulus."
Another provision gives $79 billion to help states that are fighting budget deficits and crumbling infrastructure.
"I'll give it a 'B-plus,' because I'm not exactly sure how the states are going to spend the money," Altshuler said.
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