Son Of Stimulus

Our View: Panic Over Jobless Rate Is Fueling An Imprudent Call For Spending

July 10, 2009

Governors like Maryland's Martin O'Malley and Pennsylvania's Edward G. Rendell may be open to a second stimulus bill - as governors are seldom opposed to accepting federal largesse of most any kind - but that doesn't make it sound economic policy. To even be discussing such a plan when perhaps 10 percent of the $787 billion stimulus package approved in February has actually been spent is extraordinary even by the standards of Washington and the drunken-sailor crowd on Capitol Hill.

But talk of another round of aid has intensified as economists ponder the latest unemployment figures. At a quarter-century high of 9.5 percent in June, the jobless rate is likely to bust the double-digit mark in a matter of months if not weeks and stay that way for some time. With wages depressed in much of the country and the unemployment ranks likely to grow, the outlook for consumer spending is not particularly good.

Vice President Joe Biden's remarks last weekend, particularly his statement that the administration "misread how bad the economy was," would seem to give a justification for additional measures even if, as Mr. Biden hastily added, taking action right now would be premature.

If the White House is waiting to see how voters react to the idea, however, President Barack Obama and the governors are bound to be disappointed. Polls suggest that the drumbeat of Republican criticism over federal spending has had an effect on public sentiment. People are getting antsy over how much debt is piling up.

Even if a second stimulus is directed entirely at more public works spending and helping the floundering public sector (if only to hold off tax increases), the nation's five-month experience with stimulus aid has demonstrated that no instant revival will be forthcoming.

That doesn't mean the first stimulus effort was unhelpful. Job losses would likely be greater if not for government spending, but it's likely only a marginal improvement, perhaps in some instances more of a psychological boost. The U.S. economy is far too big for even such a massive federal effort to entirely heal what the real estate downturn and financial crisis have wrought.

But what some liberal economists are now recommending - that a second stimulus be less about new government programs and more about jobs - only underscores the flaws in the first stimulus package. If Congress wants a do-over, it would be better off redirecting stimulus funds that are not yet out the door.

Admittedly, that's an easier position to take in Maryland, which does not nearly have the unemployment of a Michigan or Ohio. But even voters in those states are worried about government spending. A recent CNN/Opinion Research Corp. poll found the deficit ranks behind only the economy as the nation's most important issue.

What's needed right now is patience in Washington and some belt-tightening by the states. That alone might reassure many in the business community - at least those who fear that uncontrolled government spending could make matters worse. To even discuss adding to the federal debt now suggests the mood in Washington is more panicky than prudent.

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