White House senior adviser Valerie Jarrett was adamant Sunday, when asked if President Obama was considering a so-called “second stimulus” to deal with the rising unemployment rate. “I think it’s too soon, it’s premature to say is a second stimulus needed,” she told David Gregory, the host of NBC’s Meet the Press.
But a moment later she said the White House was already looking at tax credits and other measures to further stimulate the economy. “There are a range of suggestions that are being considered right now by his economic team, and we’ll see what we come forward with,” she added.
On its face, the two comments sounded like a contradiction. But at the White House, there is no confusion. More stimulus is coming, but it just won’t be called “stimulus.” Economic advisers, in concert with senior Democrats in the House and Senate, are planning additional piecemeal benefit extensions, tax breaks and other spending that could eventually add up to as much as $100 billion, say some outside experts. “The fact is that this is a word game. It isn’t a discussion of the ‘second stimulus,'” says Jennifer Psaki, a White House spokeswoman. “This needs to be an ongoing discussion between the President and his economic team about new ideas and ways to get people back to work.”
Prominent economists like Mark Zandi at Economy.com, who has counseled the White House and also worked with the presidential campaign of John McCain, say there is little doubt what is going on. “Yes, I think it’s a form of stimulus,” said Zandi, who has always favored a second stimulus. “This is what I always thought would happen, policy makers would take it one step at a time.”
In other words, the new stimulus efforts, which are still under discussion, are unlikely to be packaged into a single bill, which would be politically unpopular. An August Gallup poll, for instance, found that 65% of Americans opposed a “second stimulus” and 51% thought that the federal government “should spend less” than it is currently spending on stimulus. And that opposition is likely to grow after Friday’s announcement that the federal deficit for the fiscal year that just ended hit $1.4 trillion, which, at almost 10% of the total economy, represents the largest share since the end of World War II.
The exact content of this piecemeal, second effort is not yet known. The White House has so far declined to spell out its wishes. On Wednesday, President Obama announced his desire to give seniors one-time checks for $250 in lieu of any cost of living increase in Social Security checks this year. The checks, costing about $14 billion, would be paid for with an increase in payroll taxes for people with incomes over $250,000.
House and Senate leaders have also been discussing extending unemployment benefits another month or longer and a program, known as COBRA, that helps the newly unemployed pay to keep their employer-provided health insurance. Other measures on the table include an extension of the first-time homebuyer tax credit, which is set to expire on December 1 and has helped stabilize the housing market this year. The White House has said Obama supports extending all three programs, though it remains unclear whether they would be offset with other tax increases.
House Speaker Nancy Pelosi said recently that she may support a tax change, called a “loss carryback,” that would allow money-losing companies to more quickly get tax refunds. Another provision under consideration would extend tax breaks that would allow companies to quickly write off the costs of new purchases. Though many of these provisions could be acted upon before the end of the year, another stimulus proposal to send more federal money to cash-strapped states in 2011 is likely to be put off another year. The February stimulus bill provided about two years of additional state funding. Driving the call for more stimulus efforts is the unemployment rate, which now sits at 9.8%, and is expected to rise into next year, even though the recession may have already officially ended. Republicans, who have long been critical of the $787 billion stimulus that passed in February, are likely to support some, if not most of these new spending programs, in part because they are politically popular. Texas Republican John Cornyn, a vocal opponent of the February stimulus, said recently that he was in favor of some more federal spending efforts. “I think there are things we need to do to help people who need help,” he said Oct. 4 on ABC’s This Week.
Other Republicans, like economist Kevin Hassett, a former adviser to McCain’s presidential campaign, say it might be better to focus on policy fixes that could have long term impacts, not just short-term impacts. “You can have a stimulus every quarter from now until we go bankrupt,” Hassett said. “But would that be good policy”
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