ANALYSIS - U.S. stimulus a small patch for big economic hole

By Emily Kaiser

WASHINGTON (Reuters) - The $787 billion U.S. economic stimulus package may not be able to live up to lofty expectations, painting President Barack Obama into a policy corner once the money runs out.

With only a little under 7 percent of the stimulus actually paid out so far, it is a bit early to try to measure success. However, the White House is already fielding questions about whether another spending package will be needed.

One of Obama's top advisers said on Sunday that the current stimulus plan is "adequate to the task."

The problem is that while a sum of $787 billion may be vast, it pales in comparison to the more than $12 trillion in household wealth that has been wiped out since the recession began at the end of 2007.

That is why consumers saved a substantial portion of the government money they received. Now that the flow of government money to households is slowing, the concern is there won't be sufficient spending to power a consumption-driven economy.

"You don't want to create false expectations and I'm worried that they did," said Dean Baker, co-director of the liberal Center for Economic Policy Research in Washington.

Baker said it was unreasonable to expect a stimulus package to fill the gaping hole in household wealth or restore economic growth to pre-crisis levels. The best the White House could have hoped for was to cushion the blow from the recession, and by that measure the stimulus does appear to be working.

Personal disposable income rose sharply in May, and the gain was almost entirely due to stimulus money. But the saving rate shot up to 6.9 percent of income, and at $768.8 billion was the largest on record.