The Obama administration last week suggested it has no immediate plans to push Congress for a second stimulus package.
Thank goodness.
The president acknowledged that with unemployment approaching 10 percent, spending more borrowed money is “potentially counterproductive.”
Clearly, the stimulus package has not spurred the kind of job growth that had been hoped for. That’s not to say that over time it won’t be a success.
It is, however, clear that now is not the time for another round of government spending.
The country is faced with record budget deficits and a 26-year-high unemployment rate of 9.5 percent that is expected to rise to double digits.
The economy lost 467,000 jobs in June, exceeding economists’ forecasts, while the federal budget deficit is projected by the Congressional Budget Office to top $1.8 trillion this year and $1.4 trillion in fiscal 2010.
As reported by Bloomberg News, the Treasury is increasing debt sales to pay for the spending. After more than doubling note and bond offerings to $963 billion in the first half, another $1.1 trillion may be sold by year-end, according to Barclays Plc. The second-half sales would be more than the total amount of debt sold in all of 2008.
One would think such numbers were enough to put the brakes on additional stimulus spending. That, however, is not necessarily the case. Laura Tyson, an adviser to Obama during last year’s presidential campaign who now sits on the White House’s Economic Recovery Advisory Board, told Bloomberg the U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the bill approved in February was “a bit too small.”
Rhode Island Sen. Sheldon Whitehouse, a Democrat whose home state has a 12 percent jobless rate, told ABCNews.com that a second stimulus is “probably needed.” Action by Congress would “probably take place towards the end of the year,” Whitehouse said.
Connecticut Rep. John Larson told Bloomberg that the stimulus should been called an “economic stabilization” and he called for more spending on transportation infrastructure “to put the country back to work.”
Larson, a member of the House Democratic leadership, said “there is a lot of support” in Congress for transportation legislation, which the Obama administration opposes, favoring instead an extension of the current program.
Republicans, of course, have seized on the economic numbers as proof they were correct to vote against the February stimulus plan. However, it is too early to crow about being right.
As the White House pointed out, about $200 billion of the $787 billion allocated in the bill has been obligated or spent, and the effects of the spending and tax cuts should continue to ramp up in the next few months.
“There is no conceivable stimulus package on the face of this earth that would fully offset the deepest recession since the Great Depression,” Bernstein told Bloomberg News.
Bernstein has a point.
But so too do those who suggest that passage of an additional stimulus plan at this time would only add to the nation’s short-term financial woes.
Let’s take a step back and give the February package a chance to work before any consideration is given to additional borrowed spending.
Reader response:
“In regard to the stimulus investment, my understanding is as follows:
1. The current surging fuel cost (World oil prices doubled during the last 6 months) is overwhelming the market rally.
And the pending clean energy bill might serve as a second stimulus package world-wide boosting private investments.
2. People are so worried about losing their job, coverage, denial of treatment, which seems to increase bank deposit latetly. That means stimulus funding mainly goes toward bank deposit for a rainy day increasing jobless rate. It proves again that a healthy society yields better productivity, prosperity.
It is time to ‘Change’ the notion of the public health as a fundamental human right and install ‘a safety system for all’ like all of the other industrialized nations, I think.
3. The stimulus funding begins to mobilize just 11%, meanwhile, the auto industry has undergone its restructuring with the massive job-related impact.
4. The pandemic swine flu has been hurting the global economy seriously.
Thank You !” — hsr0601
