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US stimulus plan showing its impact: Summers

By Lalit K Jha in Washington
March 14, 2009 11:59 IST
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The $787-billion stimulus plan has started showing some signs of positive impact on the US economy within a month of being put into force, a top adviser of US President Barack Obama said.

"It is modestly encouraging that since it began to take shape, consumer spending in the US, which was collapsing during the holiday season, appears, according to a number of indicators, to have stabilised," National Economic Council Director Lawrence H Summers said on Friday.

Delivering his major economic policy speech at the prestigious Brookings Institute, Summers, however, candidly acknowledged that it is 'surely' too early to gauge the broader economic impact of the President's programme.

Summers is said to be the man behind the stimulus plan, the largest peacetime economic expansion programme in the US history. It will inject nearly $800 billion into the economy, three-fourth of it within the next 18 months.

The plan, he said would save or create about 3.5 million jobs, double renewable energy capacity in next three years, support middle-class incomes, modernising 10,000 schools, and making the largest investment in the past 50 years.

"Already, its impact is being felt by cops and teachers who would have been laid off but whose jobs have been saved -- t may retain 14,000 teachers in New York alone," Summers said.

"It will, for most American workers, be felt in the coming weeks as withholding schedules are adjusted, in continuing unemployment insurance benefits and health benefits for hundreds-of-thousands of workers who already would have done without, and in contracting already underway with respect to tens-of-billions of dollars of infrastructure projects across the country," Summers said.

He said as a result of government interventions in the financial markets, key credit spreads are already substantially narrower than they were last fall.

"There are some indications that the expectations of future actions have been a positive in reducing credit costs in a number of key areas," he said.

He hoped that further support for capital markets, transparency with respect to the condition of banks, and infusion of capital into the banking system will create virtuous circles leading ultimately to financial and economic recovery.

"No one can know just when its positive effects will be fully felt. No one can predict when this crisis will be resolved," he said, adding that he is confident the US will emerge more prosperous, stronger, wiser, and better prepared for the future.

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Lalit K Jha in Washington
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