Another Economic Stimulus Looks Likely

Washington Matters

Another Economic Stimulus Looks Likely

Democrats don't like to talk about it -- and for obvious political reasons, they certainly don't want to call it another "stimulus." But at some point, prospects will rise, probably early this fall, for congressional consideration of a second "assistance" or "targeted aid" or "recovery enhancement" package that will amount to another stimulus attempt.

Only a few Democrats are publicly keeping the door open to another stimulus, including House Majority Leader Steny Hoyer of Maryland. Republicans relish the talk, saying it vindicates their opposition to the first, a $787 billion, two-year package  enacted in February that they argued at the time would not create the promised jobs, be used for infrastructure projects of dubious value, drive up the deficit and was being passed in a partisan rush. They scored some points, there. The February stimulus package was rushed, and the public is turning sour on it.  

Most Democrats, for now, are saying talk of a second stimulus is premature, including Senate Majority Leader Harry Reid and President Obama and the White House economic team, preferring to say patience is needed to see the effects of the first bill, which they refer to nearly consistently now as the "economic recovery plan," a linguistic effort to dampen expectations that it was ever intended to work overnight.

They have a point there -- only a small part of the February package was intended to be injected quickly. Nonetheless, most people call the whole thing a stimulus package, and most say it is working too slowly. Also, Washington seems to be more focused right now on the health care debate with attention on the stimulus slipping a little, at least until the next jobs report comes out.


Several noted economists say another stimulus will be necessary since the first plan is being rolled out slowly, even if by design, and joblessness is rising. A prominent outside advisor to President Obama, Laura Tyson, has said another round of stimulus should be considered. Tyson is a member of Obama's economic recovery advisory board. Princeton economist and Nobel laureate Paul Krugman has long called the first package too small. He chimed in earlier this month again.

There's likely to be more voices before long calling for more stimulus. For one, national unemployment could tip above 10% in September and possibly even higher in economic-engine states like California and Michigan. Other struggling states and local governments will be hard pressed not to lay off more public sector workers to keep budgets balanced.

A slow recovery may also require states to cut services, even as social service programs are already strained with more families needing assistance. (State and local budgets historically lag an economic recovery, so even if national economic indicators look promising, states will still be in a bind for another year at least). Add to the mix continued tight consumer spending all around and fear-driven frugality in what now has become the longest recession since 1933. States will suffer. There is little doubt.

Governors and mayors will be clamoring for aid this fall, calling it necessary to avoid laying off or furloughing police, firefighters, emergency medical teams, yet more teachers and the like. They'll say other, less critical jobs (librarians, administrative staff and such) and accounts for the needy have already been cut, and they'll warn more sizeable layoffs will only further slow a national recovery. More yet, looking for aid.


At that point, the language debate over what to call it and the blame game over whether the first stimulus was properly fashioned or executed may pale in light of the urgency later this year for a targeted, short-term stimulus to keep states and cities and yet more unemployed workers and families above water. That may well happen, even though it is bound to create another deficit headache for the White House and Congress.