Compromise Stimulus Means Short-Term Pain

Unemployment will climb, recession will last until end of 2009
By Jason Farago,  Newser Staff
Posted Feb 12, 2009 5:30 AM CST
Led by Senate Majority Leader Harry Reid, center, lawmakers announce agreement on the $789 billion economic stimulus measure at the Capitol in Washington, Wednesday, Feb. 11, 2009.   (AP Photo/J. Scott Applewhite)
camera-icon View 4 more images

(Newser) – The final version of the economic stimulus package will provide less immediate support for the economy than Barack Obama had hoped, reports the Wall Street Journal, and makes it likely that the US will remain in recession through 2009. The $790 billion deal cuts aid to state and local government that would have prevented job cuts, and also reduces tax breaks to workers intended to stimulate spending.

Obama had proposed to save 4 million jobs with the package, but yesterday's deal indicates the administration was willing to reduce that target to get the bill passed. The largest effect of the compromise plan will come in late 2009 and early 2010—when the economy is expected to have returned to small growth. Until then, analysts predict a whopping 4.9% contraction of GDP over 2009, while unemployment may reach double digits before the end of the year.