By Moira Herbst

At his first prime-time press conference, President Obama was asked a central question about the $800 billion-plus economic stimulus package: How will Americans know if it’s working? “My initial measure of success is creating or saving 4 million jobs,” Obama answered.

That was on Feb. 9, a day before the Senate passed an $838 billion version of the bill by a vote of 61-37, following the Jan. 28 passage of an $819 billion version in the House. The House and Senate have begun negotiations to reconcile the measures, which Obama would like to sign into law by Feb. 16, the federal Presidents’ Day holiday. When people have a job, Obama explained, they purchase and invest, allowing companies to do the same and, in turn, to hire more workers as business expands.

Indicators of Success

Yet while job creation is arguably the most important goal of the stimulus package, other parts of the bill will have a much more immediate and visible impact. Food stamp increases and extensions of unemployment benefits will be among the first noticeable effects of the package. Tax credit payments for individuals and families would follow, along with other tax breaks and incentives. Rising consumer confidence and lower unemployment will be far more gradual, and aren’t likely to surface until late 2009 at the earliest.

There’s an understanding among many economists that the sooner a government intervenes in an economic crisis, the more effective it tends to be in getting the economy back on track. That doesn’t mean that precise measurement of success is easy, however. “The problem is, we don’t know what trajectory the economy would take without the stimulus package,” says J. Bradford DeLong, an economics professor at the University of California-Berkeley. “We can’t enter a Star Trek-like divided universe in which we compare what’s happening with the stimulus versus without it. It’s hard to precisely judge its impact.”

DeLong says that looking at interest rates will provide a clearer idea of whether the stimulus plan is working. “If interest rates stay extremely low, the plan is definitely working,” he says. “If Treasury interest rates do start to rise by more than normal levels, then we worry that [the spending] is crowding out private economic activity and discouraging investment.” Specifically, he says that if medium- to long-term Treasury bond interest rates climb two or three percentage points higher in the next year and inflation sets in, the stimulus package is not having its intended effect.

Swift Help for the Neediest

Of course, how one benefits from the stimulus package depends on several factors, including income, professional skills, and where you live. “What you’ll see [in benefit] and when you see it depends on who you are,” says Steve Ellis, vice-president at Taxpayers for Common Sense, a taxpayer advocacy group. “If you are living hand-to-mouth, you should have greater access to food stamps and other assistance right away. If you’re employed and not doing as well but hanging on, you won’t see much change unless a [federally funded] construction project starts up nearby. For them, the government hand will be less visible and less direct.”

Direct assistance for the poor and unemployed, considered as among the most effective stimulus measures, will be the first to take effect. Both the House and Senate bills offer an additional $20.2 billion to extend emergency unemployment benefits for more than 3 million people whose state benefits are set to run out after March. They also offer an extra $25 a week in jobless benefits to millions of workers through the end of the year; the current average weekly benefit is $293.

The packages also would give $7 billion to states that adopt reforms that make it easier for part-time workers, low-wage earners, and women to qualify for benefits. The proposals vary in the amounts by which they would increase food stamp benefits and additional medical assistance for low-income, unemployed workers under Medicaid, but both include spending for these items. An additional $17 billion in the stimulus bills would boost the maximum Pell Grant for higher education by $400 per applicant and provide other financial aid. Along with extended benefits, the unemployed may start to see shorter lines at the unemployment office. Both stimulus bills give states $500 million to help process unemployment applications, which have been overwhelming state systems across the country.

Tax Credits and State Aid

Working and middle-income Americans will benefit from the $82.1 billion in tax credit payments the plans offer. The House plan would give individuals earning up to $75,000 a year a tax credit of $500 and couples earning up to $150,000 a year a tax credit of $1,000. (The Senate bill lowers the income cap to $70,000 for individuals and $140,000 for couples, which critics say would reduce the stimulus effect.) Taxpayers can receive this credit either by claiming a credit on their 2009 and 2010 tax returns or by reducing their withholding from their paychecks. Other tax incentives to encourage auto and home purchases, included in the Senate bill, would be experienced by consumers at the time of purchase.

Later this year, the effects of other spending will become more visible. The bills offer states tens of billions in “state stabilization” money, to fund grants for education and to patch holes that have emerged in many state budgets. (The House bill sets aside $79 billion in state stabilization funds, the Senate bill cuts that to $39 billion.) Another $3 billion is earmarked for state and local law enforcement.

In the meantime, the stimulus plans are expected to create or save jobs in various sectors of the economy. The nonpartisan Congressional Budget Office estimated that the House version of the bill would create between 1.3 million and 3.9 million jobs by the end of 2010. While police officers and teachers might feel the effect immediately, other workers would find jobs later this year on such projects as modernizing electrical grids, building highways, and weatherizing federal buildings.

Metrics May Prove Elusive

Mark Zandi, chief economist at Moodys.com (MCO), says that if the package works according to Washington’s plan, unemployment insurance claims should start to drop in the summer and continue through the fall. He warns, however, that the unemployment rate will be slower to fall because layoffs will offset some of the gains. Some economists say that even as the unemployment rate does begin to fall, it will be hard to measure what would have happened without the economic stimulus plan.

The stimulus is likely to provoke heated “Did it work?” debates for years to come among politicians, economists, and the public. “We are throwing a rock into our nation’s economic pond, and the ripple effects will spread throughout the economy,” says Ellis of the taxpayer group. Still, he says the impact might be more muted than many would hope: the annual U.S. gross domestic product is $13 trillion, while the stimulus package is about $900 billion over several years. Says Ellis: “It’s a big rock, but it’s a very big pond.”

Herbst is a reporter for BusinessWeek in New York.