How to do a second stimulus

My new column for National Journal looks at the case for a jobs bill.

Speaking to the Economic Club of New York this week, Federal Reserve Board Chairman Ben Bernanke gave a gloomier assessment of the economy than many were expecting. The recession is over, he declared, but the Fed expects no more than "moderate" growth next year. Banks are still reluctant to lend, and "jobs are likely to remain scarce for some time, keeping households cautious about spending." In the past, steep recoveries typically followed steep recessions. This time will be different, Bernanke said. The recovery might be more L-shaped than V-shaped.

Democrats in Congress were already turning their attention to a new fiscal stimulus -- and if Bernanke is right, a second stimulus may indeed be needed. Of course, Congress would rather call it something else. Polls suggest that voters are less than enchanted with the first one. With unemployment at 10.2 percent and rising, many see the $787 billion program already in place as an outright failure. Why throw good money after bad, they ask? Public debt is already on a sharply rising trajectory. Sooner or later, voters know, that will mean higher taxes. Why make this problem even worse, they say, if the extra spending will make no difference on unemployment anyway?

Avoiding the term "fiscal stimulus," House Speaker Nancy Pelosi has said nonetheless she hopes to move a "jobs bill" before Christmas. But she wants to be sure of backing the right initiative, she says, and exactly what that might be is in doubt. President Obama has called for a "jobs forum" next month. A tax credit for new jobs, direct public service employment, and measures to promote job sharing are all being talked about. Just don't say "stimulus."

With a still-weak economy, confusion over what the first stimulus has achieved, and rising fears over the long-term consequences of debt, the political options have narrowed in a dangerous way. This was never going to be an easy situation for the White House, and one needs to remember that it inherited this mess. Even so, I think that the Obama administration and its allies in Congress deserve some of the blame for the way their hands are tied.

Read on.