As economy struggles, many wonder if more can be done

McClatchy Newspapers

WASHINGTON — Should the federal government be doing more to help the economy regain its footing? That’s the question du jour after a dismal June employment report last week and Vice President Joe Biden’s confession Sunday that the administration “misread” the economy.

Within a month of taking office, President Barack Obama and Congress pushed through a $787 billion economic stimulus plan that many economists warned would be slow in delivering help. Much of the plan isn’t short-term stimulus, but it lays a foundation for Democrats’ long-term policy priorities, such as alternative energy projects.

Only about a tenth of the money has been spent so far, and only about half of it will have been spent by October 2010, according to the nonpartisan Congressional Budget Office.

Meanwhile, the unemployment rate stands at 9.5 percent and is headed higher. More than 6.5 million jobs have been wiped out since the recession began in December 2007. Home foreclosures continue at record rates, despite a flurry of government programs. Remember those toxic assets clogging bank balance sheets and resulting in a credit crunch? Treasury’s program to deal with them still isn’t producing results.

This wasn’t what the administration envisioned.

“We misread how bad the economy was,” Biden told ABC’s “This Week,” prompting Obama to note, while in Russia, that he didn’t misread the economy but rather had incomplete information.

Maybe. However, the Obama administration made its work harder by fostering unrealistic expectations. In February it projected a far rosier economic outlook than private analysts did. Team Obama expected an economic contraction of 1.2 percent in 2009, followed by a rapid expansion of 3.2 percent next year. Unemployment was expected to stay below 8 percent.

The latest monthly survey of top economists by the Blue Chip Consensus, a private concern, forecasts a weak return to growth in the third and fourth quarters, and only mild growth next year of 2 percent. Unemployment is projected to peak at more than 10 percent in the first three months of 2010.