Is More Stimulus Coming?

Last Updated Aug 18, 2010 12:07 PM EDT

The recovery has been losing steam and the public is losing faith, and that raises the question: Will Washington throw more cash at everyone in another attempt to spur the economy into creating jobs? A poll released this morning by Associated Press-GfK gives President Obama his worst ratings ever on his handling of the economy. Roughly 61 percent of Americans believe the economy has either flattened or worsened since he took office, and only 41 percent approve of his performance on the economy.

So, the pressure's on. But with the federal debt now topping $13 trillion, policymakers don't have a lot more money to spend, and opponents of direct stimulus spending argue that it is akin to pushing on a string; it doesn't work.

"There is no obvious policy response if the recovery does falter," writes Mark Zandi, chief economist of Moody's Analytics. "The Federal Reserve has few tools beyond resuming quantitative easing, which had limited success when it previously employed it. And it is unclear what Congress and the administration could do to provide a sizable near-term fiscal boost to the economy."

But surely, there's something, right? Here are some thoughts:
  • Don't expect another handout. The $400 make work pay credit that increased most paychecks for 2009 and 2010 ends on December 31. The deals you got in 2009 for car-buying and in 2009-2010 for house-buying have expired. It doesn't look like there's much desire to renew them. Bottom line? If you got used to being stimulated, that's too bad. Your paycheck could well go down in 2011, not up.
  • Small business may cash in. The Senate will consider a small business stimulus bill when it comes back in September. A similar bill already passed by the House would deliver a tax deduction of as much as $20,000 for small biz start up costs and pump more money into small business loans, both through banks and directly to businesses that have already had trouble making payments. But enactment isn't assured. The bill has already been called up and pulled back about half a dozen times by a Senate leadership that lacks the votes to pass it.
Photo by qisur on Flickr.
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