The nation's economic climate is still pretty grim. Unemployment,
which some predict will exceed 10 percent next year, is rising at a
quicker pace than the White House projected in January, weeks before
they passed their historic $787 billion stimulus package. And the
The nation's economic climate is still pretty grim. Unemployment, which some predict will exceed 10 percent next year, is rising at a quicker pace than the White House projected in January, weeks before they passed their historic $787 billion stimulus package. And the stimulus package itself -- as expected -- is taking some time to ramp up. So far, only 10 percent of the spending is out the door.
Not surprisingly, that hasn't stopped conservatives from deriding the spending bill as wholly ineffective. On Sunday, Rep. Peter Roskam made such a claim during his appearance on FOX Chicago Sunday. But economists were never concerned that the recovery package was fundamentally flawed. Instead, many feared that after negotiations with "moderates" in the Senate, the bill was too small to dig us out of a huge hole. That worry is leading some policy makers to float the idea of a second Obama stimulus package. One local lawmaker who appears interested is Rep. Melissa Bean, who told Politico today that "the thing we have to consider is the risk to not doing it.”
That risk is great. As Paul Krugman wrote in a column last Thursday, the situation on our hands today may mirror that faced by Franklin Roosevelt, who saw the economy tank after he appeased deficit hawks and slowed government spending in 1937.
Politically, it's a very difficult sell. The administration is moving forward with expensive health care and energy bills. The Democratic Congress, facing unified Republican opposition, was barely able to pass the first stimulus. And it's unclear whether the public has an appetite for more spending, especially before the administration lets the first plan run its full course. Sen. Dick Durbin told Bloomberg, "I’m not sure how you would do it."
But that doesn't mean it's bad policy. A second plan focused in a way that offsets the cutting of state budgets could jumpstart the economy in a shorter timeframe. One idea raised by James Galbraith is to reintroduce general revenue sharing for states and localities, which the Congressional Research Service estimates could have a "significant fiscal stimulus." As this debate unfolds, it's a concept worth watching.