Commentators are taking note of the five-year anniversary of the fiscal stimulus that President Obama enacted during his first month in office. Those who don’t like Obama are still asking “if the fiscal stimulus was so great, why didn’t it work?”
From 1Q2010 to 2Q2011, the stimulus caused the economy to operate above potential based on the CBO stimulus effect data. Now as the stimulus effect is waning, 2Q2011 GDP and Potential GDP are crossing. GDP trend lines show the economy is gravitating towards zero growth – and although the autopsy has not began, it is becoming clear that the stimulus did not provide the seeds necessary to reignite the economy.