Issue of the week: Is more stimulus needed?
With the unemployment rate at 9.5%, momentum for a second stimulus package is growing, even though the first hasn’t fully taken effect.
It’s practically official: The U.S. needs a second stimulus package, said Shamim Adam in Bloomberg.com. Laura D’Andrea Tyson, a member of the president’s Economic Recovery Advisory Board, told an audience in Singapore this week that the U.S. economy is “a sicker patient” than policymakers believed when they crafted the original, $787 billion stimulus package in January. She urged Congress to pass a second stimulus bill, even though the first hasn’t fully taken effect. Tyson stressed that she wasn’t speaking for the administration, said Gerald Seib in The Wall Street Journal, but she sure sounded a lot like Vice President Joe Biden. “The administration,” Biden said on ABC’s This Week, “miscalculated how bad the jobless problem would be.” That admission was widely interpreted to mean the administration would be pushing for more stimulus spending, especially in light of a Labor Department report last week showing that the economy lost 467,000 jobs in June, pushing the unemployment rate to 9.5 percent.
Bring it on, said Paul Krugman in The New York Times. Since the recession’s onset last year, the economy has dumped 6.5 million jobs, and “once you take into account the 100,000-plus new jobs we need each month just to keep up with a growing population, we’re about 8.5 million jobs in the hole.” The original stimulus package should create about 3.5 million jobs by the end of 2010. “That’s much better than nothing, but it’s not remotely enough,” especially now that cash-strapped states are imposing deep budget cuts that “will depress the economy even further.” So it’s essential that Obama deliver another round of aid for states and cities, though he can expect stiff resistance from congressional Republicans and “centrist” Democrats.
Let’s hope that Obama’s congressional opponents dig in their heels, said Jonah Goldberg in the Los Angeles Times. The first stimulus package “hasn’t prevented unemployment from soaring,” but maybe that wasn’t the real purpose of the bill in the first place. After all, the so-called stimulus measures in that bill certainly looked like “a pent-up wish list of Democratic projects.” If the administration is hinting that a second stimulus bill is needed, then it’s safe to assume that Obama & Co. is seizing on the continuing economic misery as an excuse to keep “doling out pork for as long as possible.”
It’s far too soon to say the first stimulus package has failed, said Bruce Bartlett in the Financial Times. “People should not allow their impatience to lead to the adoption of policies that will not only fail to reduce unemployment this year but could stoke inflation in the not-too-distant future.” The infrastructure money contained in the stimulus package can’t be spent overnight—in fact, the Transportation Department has so far spent only $441 million of the $20.5 billion allocated to it. As that money is spent, new jobs will appear—eventually. “We just have to wait for the medicine we have already taken to work.”