[QODLink]
Americas
US adviser defends stimulus package
Rescue plan has avoided economic 'catastrophe', adviser to White House says.
Last Modified: 17 Jul 2009 21:18 GMT
The stimulus plan has been criticised for failing to drive growth since Obama signed it in February [AFP]

A senior economic adviser to the White House has defended a $787bn financial stimulus package, saying that it is working despite rising US unemployment.

Lawrence Summers, head of the National Economic Council, said on Friday that President Barack Obama's healthcare and energy policy agenda would also drive economic growth.

"We were at the brink of catastrophe at the beginning of the year, but we have walked some substantial distance back from the abyss," Summers said in a speech at the Peterson Institute for International Economics in Washington.

"Substantial progress has been made in rescuing the economy from the risk of economic collapse that looked all too real six months ago."

Unemployment concerns

Summers' address comes days after the US deficit passed the $1 trillion mark for the first nine months of the fiscal year.

But he said that sharp rises in inflation were unlikely, given that the labour market and manufacturing industry are sagging.

"Given lags in spending and hiring, the peak impact of the stimulus on jobs was expected not to be achieved until the end of 2010"

Lawrence Summers, head of the National Economic Council

"The greatest risk to future US deficits would be uncontrolled economic contraction in the United States," he said.

The Obama administration has faced criticism in the last few weeks over the rise in unemployment across the country.

The stimulus package, which was signed by Obama in February, was aimed at creating or saving jobs but the US unemployment rate reached 9.5 per cent in June – its highest level in 26 years.

The stimulus package will not have a dramatic effect in reducing unemployment until next year, Summers argued.

"Given lags in spending and hiring, the peak impact of the stimulus on jobs was expected not to be achieved until the end of 2010," he said.

Nonetheless, some analysts contend that the rise in the number of people losing their jobs is a sign that the stimulus plan is not working.

The US economy must be more export-oriented in future if a future economic crisis is to be avoided, Summers said.

A focus on consumer spending and the use of complex financial tools that have been blamed for contributing to the current economic crisis must end, he said.

Source:
Agencies
Topics in this article
People
Country
Featured on Al Jazeera
The author argues that in the new economy, it's people, not skills or majors, that have lost value.
Colleagues of detained Al Jazeera journalists press demands for their release, 100 days after their arrest in Egypt.
Mehdi Hasan discusses online freedoms and the potential of the web with Wikipedia founder Jimmy Wales.
A tight race seems likely as 814 million voters elect leaders in world's largest democracy next week.
Featured
Activists say 'Honor Diaries' documentary exploits gender-based violence to further an anti-Islamic agenda.
As Syria's civil war escalates along the Turkish border, many in Turkey are questioning the country's involvement.
Treatment for autism in the region has progressed, but lack of awareness and support services remains a challenge.
The past isn't far away for a people exiled from Crimea by Russia and the decades it took to get home.
New report highlights plight of domestic helpers in the United Kingdom, with critics comparing it to kefala system.
join our mailing list