A Fragile Economy

Our View: President Obama's Ambitious Policy Goals Could Be Thwarted If Recovery Is Delayed

Fresh Stimulus Answers May Be Needed

April 17, 2009

Hopes that economic recovery will be quick or easy have been shadowed by a fresh flood of bad news. The housing market continues to stumble lower, construction of new homes fell sharply last month, and foreclosures surged in the first quarter. In Maryland, an array of companies announced continuing layoffs this week and General Growth Properties, owner of the Rouse malls and developments, filed for bankruptcy court protection.

The bad news is a reminder that the clock is running on the Obama administration's effort to jump-start the economy. While the president has been cautious in his assessment of the timing of a recovery, some key advisers have been more hopeful, suggesting the comeback will start later this year.

The longer economic activity remains weak, the more likely the White House will have to go back to Congress for more billions to reinforce the stimulus. And the more stimulus money Mr. Obama asks for, the more likely lawmakers will scrap many of his ambitious policy proposals, including major health care reform and aggressive investments in education, energy, housing and infrastructure, because they will add too much to the huge and still swelling federal budget deficit.

The latest housing data show the slump in that market, a major factor in triggering the recession, has yet to hit bottom. Home construction in March fell to an annual pace of 510,000 units, the Commerce Department reported, less than economists' expectations of 540,000 units. It was the second-lowest level on record, and 48.4 percent lower than a year ago.

Still, some analysts see signs that the recession may be reaching a bottom. The Labor Department said its tally of initial unemployment claims was far below analysts' expectations and the lowest level since late January. But economists caution that the figures largely reflect a slowing of the pace of economic decline compared with even worse conditions earlier this year.

The president and Congress must be prepared to act quickly to offer fresh answers if it becomes apparent that the stimulus effort is falling short. Otherwise, Mr. Obama's ambitious plans for reform may be thwarted.

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