Obama: Stimulus showing results

WASHINGTON - Days after a nonpartisan congressional analyst said "only a small part" of the $787 billion economic stimulus package was spent through the end of last month, the Obama administration said yesterday that the plan is a success.

"One hundred days later, we are already seeing results," President Obama said during a visit to Nellis Air Force Base in Nevada.

"Across America, recovery is under way," Vice President Biden said in a statement accompanying a 28-page progress report.

However, Douglas Elmendorf, the director of the nonpartisan Congressional Budget Office, was cautious in his "State of the Economy" review to the House Budget Committee last week.

"The economy will stop contracting and resume growing during the second half of this year," he said, "but the hardships caused by the recession will persist for some time."

The CBO report found that through April only $19 billion in stimulus funds had been spent. Also, Elmendorf said, unemployment is likely to peak at 10.5 percent in the second half of 2010 - higher than he had earlier expected.

Last month's unemployment rate was 8.9 percent, up from 8.1 percent in February, when the stimulus became law. The number of unemployed has increased by 1.26 million during the last two months, to 13.7 million.

The administration was nonetheless upbeat, saying that in the last 100 days, "We have obligated more than $112 billion, created more than 150,000 jobs and helped communities and tribes in every state and territory."

Without the stimulus, said Jared Bernstein, Biden's chief economic adviser, those jobs wouldn't have been available.

Moreover, Biden said, recovery is "more than just a compilation of statistics; it's the return of hope and optimism about the future that comes with making life better for communities and families across the country."

The CBO report said the $19 billion in stimulus funds spent was part of a $380 billion stimulus package authorized for this fiscal year, which ends on Sept. 30.

Independent economic analysts had largely expected the initial slow pace of spending.

The biggest chunk of stimulus spending involves infrastructure, energy, education and other projects that take time to develop, and are described in the administration report.

Bernstein said there was a "tradeoff" between getting the money out quickly and getting it out correctly.

In fact, the CBO found that the stimulus should boost economic growth between 1.4 percent and 3.8 percent for 2009. "The peak effect of the stimulus on GDP is the end of this year," Elmendorf said.

However, 2010 poses potential problems. In its March forecast, the CBO saw joblessness peaking around 9.5 percent early next year.

Now, Elmendorf said, the economy has weakened to the point that "if we were writing down a new forecast today, we would go off that peak and we would raise it" to around 10.5 percent in the second half of 2010.

Worse, he warned, "The recovery will falter in 2010 if private sector demand for goods and services doesn't accelerate to offset the diminishing federal stimulus."

The administration's report doesn't address next year.

The CBO review, which will be a key resource for lawmakers as they begin debating budget legislation after they return Monday from their Memorial Day recess, underlines that the stimulus remains a political and economic gamble while reinforcing long-held views on both sides of the debate.

The stimulus is working, said Scott Lilly, a senior fellow at the liberal Center for American Progress, which supports Obama's positions.

But Brian Riedl, a budget analyst at the conservative Heritage Foundation, said: "The economy should begin to show positive growth in the fall, but it won't be because of the stimulus."

Elmendorf told the congressional hearing: "Everything about this sort of picture is uncertain. . . . We don't know what would have happened without the legislation."