This past week, Speaker Nancy Peolsi (D-CA) announced she wants to push another $50 billion in deficit spending through Congress for economic stimulus. This is on top of the $106 billion in stimulus payments the government is still sending out to Americans. This January Pelosi promised that the first $106 billion in deficit spending payments would create 50,000 new jobs. Former Treasury officials Ernest Christian and Gary Robbins report on how Pelosi’s promise turned out:
By the end of June, $86 billion was in the hands of 105 million households. By October, the remaining $20 billion will have been shoveled out the door. But people have not gone on a spending spree. Recent Commerce Department data indicate that less than 10% of the stimulus money is being spent on new consumption.
In a classic case of government working against itself, other more powerful government actions, including the Fed’s extraordinarily loose monetary policy, have boosted inflation and caused families to restrict purchases, especially in the case of higher-priced consumer durables. Overall, compared to last year, the quantity of consumer durables purchased has declined by 1.5%. Retail sales are sluggish. Contrary to Ms. Pelosi’s confident prediction, the economy has shed 460,000 jobs since December.