Economy is kick-started, but can it motor ahead?

Economists at Goldman Sachs last week estimated that government supports for housing increased prices 5 percent over where they would be otherwise and that as the programs expire, "the risk of renewed home price declines remains significant."

The Fed has said its program to buy $300 billion in Treasury bonds will expire this month, and that its program to buy $1.45 trillion in mortgage-related securities will be wound down by the end of March 2010. (It has also indicated it will leave the bank lending rate it controls near zero for "an extended period," though there is plenty of disagreement among Fed watchers over just how long that period will turn out to be).

And spending through the $787 billion stimulus package known as the American Recovery and Reinvestment Act will taper off next year and into 2011. Nonprofit journalism group ProPublica estimates that there is about $291 billion left to spend, and $150 billion in tax cuts yet to play out.

"Programs like Cash for Clunkers and the home-buyer tax credit are like caffeine to the economy," in that the buzz dissipates quickly, said Ethan Harris, chief U.S. economist for Bank of America-Merrill Lynch. "The bigger program, the Fed monetary easing and the Obama stimulus plan, have a longer-lasting impact. But as we move out into the middle of next year, you need to see signs that economic growth has become self-generating. That's where we'll have a second test of the recovery."

Historically, some nations that experienced financial crises have rebounded relatively quickly, said Carmen M. Reinhart, a University of Maryland economist. But they tend to be nations that have moved more aggressively than the United States to remove bad loans from bank balance sheets, she said.

"We have stopped the freefall, with household spending and residential activity stabilizing and the fiscal stimulus kicking in," she said, "so the numbers for the second half are going to look like a recovery."

But Reinhart, the author with Kenneth S. Rogoff of "This Time Is Different," a history of financial crises, worries about what lies ahead. As she put it: "The question is how robust and how durable it would be. You eventually need some sort of normalcy in the availability of credit, but we haven't established that, or anything close to that."