Stimulus Woes

Unemployment is at a 26 year high. This wasn't supposed to happen. After all, Congress passed a massive stimulus bill during Obama's first few weeks in office. So what happened?

A bigger question is how a package that spends most of its money after 2009 could possibly have affected the economy now?

Vice-President Biden may have let something slip when he said that they had underestimated how bad the economy was. The cynical take on his statement is that they expected the economy to turn around this Summer on its own. They would then take credit for it and continue spending the bulk of the $800 billion.

With the economy still doing poorly, people are taking a second (or first) look at the stimulus. Last night NBC led with a New York Times story about stimulus-related road construction. It seems that most of the spending is in rural counties but most of the unemployment is in urban counties.

According to an analysis by The New York Times of 5,274 transportation projects approved so far — the most complete look yet at how states plan to spend their stimulus money — the 100 largest metropolitan areas are getting less than half the money from the biggest pot of transportation stimulus money. In many cases, they have lost a tug of war with state lawmakers that urban advocates say could hurt the nation's economic engines.

It should also be pointed out that "shovel-ready" construction projects only get $26 billion out of $800 billion.

Economists such as Paul Krugman say that this proves their prediction that $800 billion wasn't enough money and that a second, larger stimulus bill is needed. The White House is denying that they plan a second stimulus "at this point".

But the White House press secretary, speaking to reporters aboard Air Force One, suggested that could change if the country continues to lose jobs.

The idea of passing a second huge spending bill before most of the money from the first one is due to be spent is troubling. The first one will cost $1 trillion by the time interest is paid. We may have already overspent. Some economists are predicting a double-dip recession with debt-induced inflation triggering a new recession late next year. Adding in a new stimulus could ruin the economy for years to come.