How's that $787 billion stimulus plan working out?


One of President Obama's accomplishments during his first 100 days was the passage of a $787 billion stimulus plan. I think the idea of economic stimulus makes sense when an economy is in the middle of a deflationary spiral. As I posted, that's when a drop in demand leads to excess productive capacity, causing companies to cut prices and fire workers, which further lowers demand as more workers -- whose consumer spending accounts for 70 percent of GDP growth -- have less to spend.

So far, only about 10 percent of the stimulus money has been doled out and it's not having much effect in counteracting this deflationary spiral. How so? First quarter GDP plunged 6.1 percent -- compared to a 6.3 percent decline in 2008's fourth quarter -- and the preliminary numbers are usually adjusted downward. The unemployment rate is expected to hit 8.9 percent in April from 8.5 percent in March.