I always figured that the administration would take credit for any eventual economic recovery, but I also figured that they would wait for the recovery. Wrong. Christina Romer, perhaps buoyed by yesterday’s GDP release and today’s job data, says that the stimulus is working.
That may be a bit premature. Dan discussed the GDP numbers yesterday, but there are more issues. Deutsche Bank thinks that half of U.S. mortgages will be upside down by 2011 and retail is suffering. Tomorrow’s jobs data could bring more bad news.
The fact is that after the housing crash and financial meltdown, financial institutions, businesses, and consumers were over-leveraged. After months of recession, consumers and businesses are in even worse shape. And now, the government is also over-leveraged. Where does the recovery come from?
Some are hanging their hats on inventory rebuilding, but that is a one-time shot, especially if the holiday season is as weak as we expect. Some are hanging their hats on the housing market, but at best that will only stop the bleeding.
The problem with claiming victory now is that the administration risks ridicule and losing citizens’ confidence. I don’t see how that helps the administration or the economy.