Is the economic stimulus working? [Bryan]

So far, the answer appears to be yes. Most of the initial money has gone to tax cuts and keeping state and local governments afloat. This has prevented massive layoffs and has helped maintain essential services. Over the next few weeks, the rest of the public-works spending kicks into gear, hopefully bringing with it more jobs (which we really need). In short, things appear to be turning out as anticipated, even though the recession was far worse than was originally thought.

We'll see what happens in the next few months.

The Economic Policy Institute
"A substantial portion of the improvement registered in the second quarter can be attributed to the effects of the American Recovery and Reinvestment Act (ARRA). Both Goldman Sachs and Mark Zandi of Moody’s Economy.com have estimated that ARRA added approximately three percentage points to growth in the second quarter. Both of these estimates are confirmed by the Economic Policy Institute’s own calculations."

USA Today
"A huge influx of federal stimulus money to state and local governments more than offset a sharp drop in tax collections, helping to put the brakes on the nation's economic decline, new government data show. The stimulus funds helped reverse six months of spending declines, pushing state and local government expenditures up 4.8% in the second quarter, reports the Bureau of Economic Analysis."

Economist Paul Krugman
"A few months ago the possibility of falling into the abyss seemed all too real. The financial panic of late 2008 was as severe, in some ways, as the banking panic of the early 1930s, and for a while key economic indicators — world trade, world industrial production, even stock prices — were falling as fast as or faster than they did in 1929-30....So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government.

Probably the most important aspect of the government’s role in this crisis isn’t what it has done, but what it hasn’t done: unlike the private sector, the federal government hasn’t slashed spending as its income has fallen. (State and local governments are a different story.) Tax receipts are way down, but Social Security checks are still going out; Medicare is still covering hospital bills; federal employees, from judges to park rangers to soldiers, are still being paid.

All of this has helped support the economy in its time of need, in a way that didn’t happen back in 1930, when federal spending was a much smaller percentage of G.D.P. And yes, this means that budget deficits — which are a bad thing in normal times — are actually a good thing right now....

Last and probably least, but by no means trivial, have been the deliberate efforts of the government to pump up the economy. From the beginning, I argued that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, was too small. Nonetheless, reasonable estimates suggest that around a million more Americans are working now than would have been employed without that plan — a number that will grow over time — and that the stimulus has played a significant role in pulling the economy out of its free fall."