Click to play videoNew York: Days after warning that the US economy was on the brink of a possible catastrophe if the stimulus bill wasn't pass quickly, US President Barack Obama signed the $787 billion legislation into law, declaring that it would start the long process of recovery.
However, Wall Street isn't buying that assurance, at least for now. The Dow plunged nearly 4 per cent on Tuesday.
“It does too little to inject money and spending into the economy quickly. I think we could have done so with a different mix - more on taxes, less on fiscal long-term spending projects and put aside some of the structural spending projects till the time we can better assess our needs. If you're going to spend money to jumpstart the economy, then that money is better spent if it hits quickly rather than later and I don't think this legislation meets that objective,” says Chief US Economist, Nomura Securities David Resler.
“What is really important aside from the individual aspects of the bill was also to give people a sense that we’re going to do something,” says Labor Economist, The Conference Board Ken Goldstein.
President Obama has promised that the package will save or create three and a half million jobs over the next two years. Analysts say that if something like that happens then they would definitely consider it a success.
“If by the end of 2010 we have a million and a half more jobs than we have today, I would consider that a success,” adds Goldstein.
“I think we're going to continue to see large scale declines in employment, probably of the order of job losses of 500,000 a month for a few more months. Unemployment is probably going to push above 9 per cent by the middle of this year and perhaps get close to 10 per cent by the end of this year,” adds Resler.
The economic picture in the US remains grim. Automakers General Motors and Chrysler on Tuesday asked for 22 billion dollars more in government aid.
On Wednesday, President Obama is expected to unveil a plan to tackle the mortgage and foreclosure crisis in the housing market, the original trigger for the financial meltdown.
Wall Street had already given a huge thumbs down to the Obama administration's bank bailout plan, and now to the stimulus bill. Even with the various rescue packages, experts believe conditions are likely to get worse before they start getting better.
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