Larry Summers

President Obama’s top economic adviser, Larry Summers, said in a speech today that he believes the $787 billion economic stimulus plan is already working. He spoke at the Brookings Institution late this morning.

He says jobs have already been saved and consumer spending seems to be stabilizing.

Too soon?

Summers acknowledged in his speech that it was a bit early to be measuring the effects of the stimulus package. But, commented about consumer spending anyway.

“It is modestly encouraging that since it began to take shape, consumer spending in the U.S., which was collapsing during the holiday season, appears, according to a number of indicators, to have stabilized.”

Too soon, according to me

While it’s true that consumer spending isn’t plummeting the way it was during the last half, this “stable” period has only lasted for possibly eight weeks so far. Final reports aren’t in for February yet. Also, while consumer spending has stayed at about the same level, that level is very low.

If consumer spending does stabilize at this level, the economy will remain weak. We’re a long way from the days people used personal loans for unnecessary items. We need to find a balance between extreme frugality and irresponsible borrowing before the economy will truly be stable.

Jobs saved

Summers also pointed out that the economic stimulus package has already saved jobs, one of its main goals.

“Already, [the stimulus plan's] impact is being felt by cops and teachers who would have been laid off but whose jobs have been saved; it may retain14,000 teachers in New York alone.”

This is a much better indicator of concrete effects that the stimulus package has had.

Coming attractions

Summers also reminded the audience of the changes that will soon make their way into Americans’ pockets. Some could already be collecting extended unemployment benefits. Working Americans will see a little extra cash in their paychecks when withholding schedules are adjusted.