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A Second, Direct Stimulus May Be In The Works

The notion of a second stimulus package, with provisions to directly create the millions of jobs that have yet to spring from the first round, comes to us from the astute economist Calculated Risk, via his eponymous blog.

CR is a retired senior executive, from a financial services company I believe, who posts a prodigious amount of economic insight each day from morning until night. His favorite topics seem to be real estate and housing, but he also provides excellent commentary on the economy in general.

His forecast for 2010 is bleak, and he expects explicit job measures:

[A]ll the growth in Q3 [2009] was due to the stimulus package, and the impact will now wane - only 2% in Q4, and 1.5% in Q1 2010 - and then the package will be a drag on the economy (impact on GDP growth will be negative) in the 2nd half of 2010.

With unemployment above 10%, there will be significant political pressure for another stimulus package - especially if the economy starts to slow in the first half of 2010. This next package could be several hundred billion (maybe $500 billion) and could increase GDP growth in 2010 above my forecast.

CR also points us to the The Hill:
Sen. Ben Cardin (D-Md.) told The Hill that Reid (D-Nev.) made the announcement about a new jobs bill at the Senate Democrats' weekly lunch.

Reid said he was looking at an initiative focused on job creation "and that our caucus will take it up," Cardin said...

Sen. Patty Murray (Wash.), a member of Senate Democratic leadership, said that the conference is focused on ways to create jobs but that no decision about legislation has been made.

And then to the LA Times:

-- President Obama will convene a White House summit early next month to explore ways to reverse the soaring unemployment rate -- and there won't be any shortage of ideas.

Economists and lawmakers hope that such proposals as tax breaks for companies that add workers, tax cuts for small businesses and more government highway construction will get renewed attention after Obama's call Thursday for new ways to reverse job losses.

... Obama said he was open to "any demonstrably good idea" to stimulate job creation.

My new MoneyWatch colleague Mark Thoma backs up the point, writing today that although unemployment insurance claims are falling steadily, the pace needs to pick up:

[W]ith 502,000 new claims, we are still losing jobs overall. The breakeven point, i.e. the point where we are neither losing nor gaining jobs, is closer to 400,000. If the rate of decline of 10,000 to 20,000 jobs per week that we have seen in recent weeks continues, it will be quite some time before we stop losing jobs, let alone make up for the jobs that have already been lost.
This morning on MSNBC, Treasury Secretary Geithner said that the government's borrowing for the bank bailout will probably be less than initially thought, so maybe there's a few hundred billion lying around. Job creation has to start somewhere.