Without federal funds, recovery sputters to a halt

As long as the federal government pumps money into stimulus programs like “cash for clunkers,” the economy shows some signs of recovery.

But when the federal dollars run out, so does the economic bubble the cash created.

Without massive infusions of federal dollars, the American economy sputters to a halt and pessimism about the future returns.

Unemployment remains high, consumers remain wary and employers keep laying off workers.

In other words, more of the same.

Reports The Washington Post:

The fragile economic recovery has relied heavily on government stimulus spending, but new data show that as the money runs out, a sustained rebound may be elusive.

The dramatic decline in sales reported Thursday by the Big Three automakers suggested the extent to which the stimulus act has propped up the economy. The government’s wildly popular “Cash for Clunkers” program drove consumer spending to its highest level in eight years in August. But after it ended, so did the growth in auto sales.

General Motors’ sales plunged 36 percent in September compared with August. Ford plummeted 37 percent. Chrysler dove 33 percent.

Cash for Clunkers “was a one-time boost of sales followed by a crater,” said Ben Herzon, an economist at Macroeconomic Advisers. The firm forecast that the program was likely to have no effect as a stimulant for national economic output.

Other economic data released Thursday showed that the deep wounds of the recession have yet to heal. Weekly jobless claims rose more than expected, a sign that businesses are still concerned about the future. The monthly unemployment rate, scheduled for release Friday, is expected to rise, albeit at a slower rate. Consumer loan delinquencies remain at record highs, and manufacturing growth has slowed.