Stimulus II: The Restimulating
Laura Tyson, an informal advisor to the Obama White House, dared to talk about a second stimulus yesterday. I don't totally agree with her about the focus, but it's good that someone values preparation.
The United States should be planning for a possible second round of fiscal stimulus to further prop up the economy after the $787 billion rescue package launched in February, an adviser to President Barack Obama said.
"We should be planning on a contingency basis for a second round of stimulus," Laura D'Andrea Tyson, a member of the panel advising President Barack Obama on tackling the economic crisis, said on Tuesday.
Addressing a seminar in Singapore, Tyson said she felt the first round of stimulus aimed to prop up the economy had been slightly smaller than she would have liked and that a possible second round should be directed at infrastructure investment.
As Chris at Americablog notes, the first stimulus should have been designed to be sufficient enough, but it wasn't, and the President and his team should just drop the "nobody could have anticipated" crap and start anticipating the reality of a continued shortfall in output.
Where I disagree with Tyson is in the focus of Stimulus II. She says infrastructure investment, which is of course important. Maybe more of our projects could have been shovel-ready if we followed France in recognizing that any construction-creating jobs are valid, instead of disqualifying the building of museums or parks due to nonsense about "pork." But more to the point, we should in a Stimulus II provide relief for the states so they can maintain their budgets and contribute to economic recovery instead of damaging it. The perverse nature of balanced budget amendments and a recession is really stagnating the national economy. We need a permanent state fiscal stabilization fund that kicks in during recessions.
I guess Wall Street doesn't like the notion of a second stimulus, mainly because it turns their green shoots to mud. Tough. We have to look at reality, which is that the economy is not working for regular people, and without consumer spending or private investment only government can provide the kickstart necessary.