Green Shoots, but Still Gloom

The academic economists who officially declare the beginning and end of recessions aren’t ready to say this one’s over yet.

But several signs are pointing to better times, and one should make just about every taxpayer a little happier. Turns out the bailouts the government gave to big banks, automakers and insurer AIG when the market collapsed in fall 2008 won’t cost as much as originally expected.

The Wall Street Journal reports the Treasury Department expects the total price tag of the Troubled Asset Relief Program, capital poured into Fannie Mae and Freddie Mac, and programs by the Federal Housing Administration and Federal Reserve to prop up the mortgage backed securities market will cost about $89 billion. A lot of money, for sure, but it’s far less than the hundreds of billions we expected just a year ago.

Just last year, the Congressional Budget Office estimated the cost of the bailouts would be $250 billion.

But so far, of the $245 billion the Treasury invested in banks alone, the government has been paid back $169 billion. And when you count dividends and other income, the Treasury is likely to reap a profit of $8 billion from TARP.

The change in numbers is due to the quicker-than-expected recovery of the nation’s financial system after the disasters of 2008.

It will be interesting to see, though, whether the less-than-expected cost of all the bailouts lessens the populist anger unleashed when they went into effect.

"How do you put a price tag on populist rage that's polluting all economic policy making?" Anil Kashyap, a University of Chicago economist who has criticized the U.S. government's bailout, told the Journal.

And while we’re talking about good news, there’s a little more that indicates big consumer brands are expecting a revival in American spending.

Procter & Gamble, Colgate-Palmolive, Kimberly-Clark Corp. and Clorox Co. are pouring more money into advertising, betting that consumers will be ready soon to start spending again.

Spending on advertising for brand-name products was up 15 percent over last year in January, and 12 percent in February. That’s because brand-name consumer products companies are trying to win back consumers who traded down to generics in the downturn.

But it may still be a while before that advertising pays off. With unemployment hovering at 9.7 percent, consumers are still cautious.

And if consumers are cautious, so is the group economists who determine the official beginning and ending of recessions. The recession began in December 2007, and the nation’s Gross Domestic Product began growing again last year. But the Business Cycle Dating Committee of the National Bureau of Economic Research was reluctant to say the recession has ended.

“Although most indicators have turned up, the committee decided that the determination of the trough date on the basis of current data would be premature. Many indicators are quite preliminary at this time and will be revised in coming months,” the NBER wrote in its statement.

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Kent Bernhard Jr. is News Editor of Portfolio.com