Does US need a second stimulus to create jobs?
With the economy still in rough shape, calls mount for extra infusions of federal money. But critics say the first stimulus hasn't created the jobs it was supposed to.
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"That's an adjustment that needs to happen," says Enrique Mendoza, a University of Maryland economist who has studied the effectiveness of fiscal stimulus programs. "Consumption is going to be less. To that extent, [this adjustment] conflicts with what the fiscal expenditures are trying to do."Skip to next paragraph
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As he sees it, fiscal support has been effective and is still needed. It has helped to keep unemployment from being worse. Given the high jobless rate, he says, an extension of aid for the unemployed is warranted. But stimulus can't build the whole bridge back to a full-employment economy.
"With such countries that have ‘lived beyond their means' ... it is a mistake to try to prevent this process of competitive adjustment," he told a congressional panel last month. "The adjustment can be cushioned by fiscal policy.... But attempting to postpone adjustment with repeated fiscal stimulus is almost always a mistake."
Lawmakers know one thing, though: Voters want to see jobs. Unemployment could be a pivotal issue in 2010 elections.
On Nov. 6, Obama said his team is actively considering additional jobcreation efforts, from road-building to tax incentives and credit programs for businesses. The White House has planned a December jobs summit to explore ways to boost hiring by private firms. Moreover, by next spring, states will be considering their budgets for a new fiscal year, and deep job cuts are likely if the initial federal aid to states isn't expanded.
Early this year, as the Recovery Act was taking shape, most Americans supported federal spending to prop up the economy. Since then, the banking crisis has eased, and the economy has pulled out of a free-fall. Meanwhile, Congress's focus on health reform is drawing attention to the prospect that taxes may go up in coming years. The poll now finds Americans tipped against new stimulus spending.
Thus, some in Congress may take a wait-and-see approach. The bulk of Obama's original recovery program has not yet been spent – and is slated to roll out over the next 12 months. Lawmakers are hearing mixed views from economists, not the pro-stimulus consensus that existed earlier this year.
Where the jobless rate heads from here is likely to determine the mood on Main Street and Capitol Hill. Some groups already face particular stress. Unemployment is more than 15 percent for African-Americans, people ages 20 to 24, and workers in Michigan, for example.
What has the massive stimulus achieved so far? Here's an overview, based on data tracked by private-sector economist Mark Zandi:
• Some $50 billion, or nearly one-third of Recovery Act spending so far, has gone to safety-net programs and to one-time payments to Social Security recipients. The programs, including extended unemployment insurance benefits and food stamps, are not only compassionate but also effective at boosting consumer spending, says Mr. Zandi of Moody's Economy.com in West Chester, Pa.