Economic Stimulus Programs Begin Winding Down

Emergency unemployment benefits are ending, the auto bailout is over, and the Federal Reserve is scaling back its market support. All these are signs that federal stimulus is coming to an end. NPR's Linda Wertheimer talks with TIME magazine's Michael Grunwald about the winding down of government recovery efforts following the financial collapse of 2008.

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LINDA WERTHEIMER, HOST:

This is WEEKEND EDITION from NPR News. I'm Linda Wertheimer. Scott Simon is away. Long-term unemployment benefits expire today for more than a million Americans. In the wake of the 2008 financial crisis, Congress repeatedly extended the length of time laid-off workers could receive unemployment checks, but in the latest budget deal, lawmakers fail to approve another extension of those benefits.

It's just one sign among many that the federal economic stimulus programs are winding down. To talk about what that means, we reached Time magazine's Michael Grunwald. He is the author of the "The New New Deal," a book about the government effort to keep the great recession from getting worse. Mr. Grunwald, welcome.

MICHAEL GRUNWALD: Thanks so much for having me, Linda.

WERTHEIMER: Now, one of the features of the federal effort was the auto industry bailout earlier this month. The government sold its last shares in GM. Overall, do you think the auto bailout is considered a success or failure?

GRUNWALD: Oh absolutely. It's been a huge success. Remember back in those dark days at the end of '08 and the beginning of '09, people were talking about potentially millions of jobs lost in the industrial Midwest if GM and Chrysler had gone down, and for what ended up being a total of, what, about $12 billion they were able to resuscitate the industry. It's now recording profits again, it's hiring, it's selling. It was a very cheap investment.

WERTHEIMER: Also this month, a Federal Reserve announced that it is winding down its stimulus program, reducing its monthly bond purchases in the new year. Now, why did the Federal Reserve feel that it was the appropriate time to take this step?

GRUNWALD: Well again, this really has been a sort of extraordinary time for the Federal Reserve, where they've just been pumping monetary stimulus into the economy. They're still going to be pumping monetary stimulus into the economy, but instead of $85 billion a month they're going to taper it down to $75 billion. People expected them to start this taper much earlier but because Congress has been so resistant to fiscal stimulus, Ben Bernanke has been kind of outspoken, saying, hey, Congress is not doing its part so the Fed is going to have to keep pumping in money.

WERTHEIMER: Well, do you think that signs are now pointing to the possibility that the economy is strong enough, that it no longer needs a high level of federal intervention? Or do you think that all of this sort of dialing down is coming because of the Congress and its fatigue with government spending?

GRUNWALD: Well, certainly if you think where we were in late 2008 and early 2009, when we were losing 800,000 jobs a month, we were in what looked a lot like the beginning of a depression. So when you compare where we are now to where we were then, it's remarkable and it's understandable that people feel like, hey, you know, we're doing a lot better, because we are.

That said, we still have an extremely high unemployment rate. This is not a new normal. It's pretty bad. There's still slack in the economy. To say that, you know, we're now safe enough that we can shut down is, you know, it's hard to say that.

WERTHEIMER: Michael Grunwald is the senior national correspondent for Time magazine. Mr. Grunwald, thank you very much.

GRUNWALD: Thanks so much for having me, Linda.

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