Is There Momentum for a Second Stimulus?

Paul Solman: I’ve been tweeting for the past few months and some “followers” have taken to asking questions directly on Twitter. I’ll be posting a couple of recent ones this week, with my stenographic (haiku-like?) replies, expanded for the Business Desk.

“Carol Phillips,” who describes herself as “Notre Dame Marketing professor, Millennial marketing expert, market researcher, President Brand Amplitude, Mother of 2 Gen Y kids,” wrote:

“Curious why the stimulus money isn’t being used for college debt relief? Would put money in hands of people who would spend it.”

Having to put both the question and answer into 140 characters, I tweeted back as follows:

“Tweet Q: why not stim $ for college debt relief — $ to people who’d spend it? My A: very good Q. But no stimulus momentum at the moment.”

To expand on my answer briefly, there had been those calling for a second stimulus as the first one ebbs, and not long after I Tweeted, President Obama announced (Tuesday) that he would urge Congress to put leftover TARP money to work, putting Americans to work. From the AP:

“Obama proposed new spending for highway and bridge construction, for small business tax cuts and for retrofitting millions of homes to make them more energy-efficient. He said he wanted to extend economic stimulus programs to keep unemployment insurance from expiring for millions of out-of-work Americans and to help laid-off workers keep their health insurance. He proposed an additional $250 apiece in stimulus spending for seniors and veterans and aid to state and local governments to discourage them from laying off teachers, police officers and firefighters.”

On the PBS NewsHour last night, Paul Krugman approved, worrying only that the program would be big enough, given the jobs “crisis” we’re in the midst of. Krugman has been pushing, among other ideas, a business tax break for creating U.S. jobs, an idea proposed by the Economic Policy Institute and long argued, as we’ve pointed out before on this page, by mathematician and economic thinker Ralph Gomory. Read more…

Last week, the head of the administration’s Council of Economic Advisors, Christina Romer, published an op-ed in the Wall Street Journal suggesting renewed spending along these lines — and others — might well be warranted, setting the stage for Obama’s remarks at the Brookings Institution on Dec. 8. And in this Sunday’s NYT, Cornell’s Bob Frank laid out the case for stimulus to provide a tail wind against the doldrums.

Finally, on behalf of increased spending, look at what Japan did Monday. It announced, according to Bloomberg News, an $81 billion dollar “economic spending package amid growing signs the recovery [is] waning.” If America did the same, proportional to our economies, that would be a $200 billion second stimulus, which isn’t far above what President Obama seems to be proposing.

On the other hand, anti-deficit arguments are much in the air these days and author/blogger Bruce Bartlett, despite describing himself as a recovering Reagan-era supply sider, spoke for many when he debated Krugman on the NewsHour Tuesday by saying that more spending means a higher deficit and that’s not good.