With murmurs becoming louder this week for the possible need for a second stimulus package, House Democrats were presented today with a report that may give them the cover they need to start setting expectations for a second stimulus.
The report by a group of economists including Mark Zandi, chief economist of Moody's Economy.com, says the recently enacted $787 billion stimulus package will fall far short of the Obama administration's goal of saving or creating 3.5-million jobs.
Zandi said only 2.5 million jobs will be saved or created over the next two years, and told House Democrats that a second stimulus is needed as well as more money for banking stabilization and housing.
So, let me see if I understand Mr. Stephanopoulos correctly, if the first stimulus fails to meet its goals, that is the cover those that pushed it to get another massive stimulus.
Now, I understand that Mr. Stephanopoulos makes his living in political strategy and analysis, however it appears that I will have to give Mr. Stephanopoulos a lesson. There is no second stimulus. The president will NOT under any circumstances have the political capital to get another one. Whether the first one is seen as working, or seen as failing, there is no second stimulus.
In fact, on this point, I am in the dubious position of agreeing with Paul Krugman.
So here’s the picture that scares me: It’s September 2009, the unemployment rate has passed 9 percent, and despite the early round of stimulus spending it’s still headed up. Mr. Obama finally concedes that a bigger stimulus is needed.
But he can’t get his new plan through Congress because approval for his economic policies has plummeted, partly because his policies are seen to have failed, partly because job-creation policies are conflated in the public mind with deeply unpopular bank bailouts. And as a result, the recession rages on, unchecked.
Krugman is from the hyper Keynesian camp that said that we need to spend trillions to get us out. The President settled on nearly $800 billion. The president has made his stimulus bed and now he will sleep in it. If this stimulus doesn't stimulate, that's it, for stimuli and his presidency.
Krugman is absolutely correct (I shriek) that if this stimulus is seen as not working, whatever the reason economically, that will be an indictment of the overall philosophy. There is no second stimulus. If this one has failed, the Republicans and the public at large will demand an entirely new economic philosophy.
If we are still near or at double digit unemployment next year, you can expect a steady drumbeat from Republicans and the public of tax cuts and cuts in government spending. They will get it because President Obama put his entire presidency on this stimulus. This one has to work or he is through. It was, in his words, necessary and needed to be done immediately. Furthemore, it was, in his words, the exact right amount. Perceived failure is NOT cover for more of the same PERCEIVED FAILING policies. It belies someone with as much political experience as George Stephanopoulos to know such basic and trivial political matters.
So, Republicans, fiscal conservatives, and anyone else that opposes the first stimulus, let one thing be known. There are no more stimuli. The president has one shot and one shot only. After that, there is no political capital for more.