Is the Obama Economic Stimulus Taking Effect? NYT Optimistic

Once again the Times plays on the front page economic optimism inspired by Obama's "stimulus" plan, buries inflation concerns in paragraph 17.

Friday's front-page story by Nelson Schwartz from Paris displayed yet more optimism about the economy (thanks to Obama's intervention) in "U.S. Recovery Could Outstrip Europe's Pace."

There was more evidence Thursday that the United States economy might be stabilizing, if not rebounding, even as economic reports in Europe remained gloomy.

The American news - showing slight growth in retail sales and a dip in first-time jobless claims, as well as rising stocks- was not enough to end the disagreement between bulls and bears over how soon the economy would improve.

But the apparent divergence of fortunes between America and Europe highlighted the different approaches to solving thefinancial crisis, and why some economists say the more aggressive American strategy may be working better, at least for now.

It is a debate that is likely to be one of the issues dominating discussions when finance ministers from the eight largest economies meet in Italy this weekend.

The Times has at least belatedly remembered that back in January, the Obama campaign predicted unemployment would peak at 8 percent this year, provided Congress passed his massive spending - er, "economic stimulus" plan. Oops: May's figures came in at 9.4%, a half-point increase since April.

Yet that number was seen as cause for optimism by the Times, one that "fueled hopes" of a recovery.

Schwartz passed along some optimistic economists staking outrosy claims. Will the Times follow up if they don't pan out?

Some private economists are even predicting that the American economy will resume growth in the fourth quarter, while Europe's economy is expected to remain in recessionwell into 2010, after contracting an estimated 4.2 percent this year compared with an expected 2.8 percent decline in the United States.

"The shock originated in the U.S., but Europe is paying a higher price," said Jean Pisani-Ferry, a former top financial adviser to the French government who is now director of Bruegel, a research center in Brussels.

Almost from the beginning of the crisis, the United States and Europe chose largely different paths to aiding their economies. The most stark was Washington's willingness to commit hundreds of billions of dollars to stimulus spending - in addition to moving aggressively to shore up banks and keep credit flowing - versus Europe's worry that similar spending would increase inflation in the future.

Finally, in paragraph 17, there's this warning:

There remains a significant risk that deficit spending in the United States could lead to inflation in the long run. Concern over the deficit has already led to a sharp rise in interest rates in the last month. A continued rise could threaten an American recovery.