The current brouhaha over Caterpillar is probably a pretty good cautionary tale for stimulus cheerleaders. The fact is that effects of the stimulus package won't be as immediate an improvement for businesses and workers as most would wish. Earlier this week, the President said the stimulus would allow Caterpillar to bring back some of its recently laid off workers.
But Caterpillar CEO JIm Owens says that's not exactly the case. In fact, Owen says, Caterpillar will probably need to layoff additional workers before any rehiring takes place.
From ABC News:
Owens also cautioned that even if a stimulus is passed within the next month, the effects will not be immediate and are more likely to impact construction activity at the end of 2009 or spring 2010.
"As these projects kick in, one concern I have that we need to be mindful of, is that even if this stimulus package passes, not only here but around the world, it still takes a little time to bid the contracts and get the dirt work started," said Owens, who serves on the president's recently announced Economic Recovery Advisory Board and flew to Peoria aboard Air Force One.
That's precisely what has economists concerned. Martin Feldstein, a conservative economist in favor of a stimulus package, calls this particular package an "$800 billion mistake."
The effects will be slow--which negates much of the purpose of the stimulus. Construction is a great example. "A large fraction of the stimulus proposal is devoted to infrastructure projects that will spend out very slowly, not with the speed needed to help the economy in 2009 and 2010," Feldstein wrote in a Washington Post editorial.
While the package is large, that's not the problem, Feldstein says: "The problem with the current stimulus plan is not that it is too big but that it delivers too little extra employment and income for such a large fiscal deficit."