Lags

One thing that I found interesting in light of President Obama’s Inauguration is a discussion in the AP from last week of the actual lags that the proposed fiscal stimulus may experience. Some of the economists at the Congressional Budget Office have argued that the proposed infrastructure projects will actually take several years to boost the economy. According to the CBO, stimulating the economy through investment in public projects may not be as effective because some of the funds aimed at strengthening the economy will be released over the next one to four years. As the AP indicates, less than half of the proposed $30 billion will reach the economy in the next four years.

The current recession is expected to last more than a year. However, the economy is likely to begin recovering towards the end of 2009. What is the conclusion? A good deal of the funds specifically meant for infrastructure will reach the economy when it is actually expected to be in the process of healing. Even though, this is only a part of the solution proposed to fix the problem, it is also an illustration of the challenges that the new administration is to face. Definitely, the campaign is over and the new administration is in. I am curious to hear the 44th President’s State of the Union Address in 2010, read it alongside his Inauguration Speech and assess the implications of graduating in an economy that is still healing.