The Wall Street Journal reports that infrastructure projects are drying up without much moolah in the pipeline to keep construction demand flowing. That's bad news. The stimulus was designed specifically so that it would not dry up in the last months of 2009 but rather keep the money flowing through 2010. But as the WSJ reports, the White House, in its search for smaller "shovel-ready" jobs, has left longer infrastructure projects without funding.
Paul Krugman smells the whiffs of a double dip recession....
He also notes that manufacturing is "already slowing down." Well, that's not true. Manufacturing is still growing, as a weak dollar boosts strong exports, but the smaller ISM number indicates that November wasn't as robust as the previous months of growth.
Together these two bits of news paint a familiar picture of the economy. A weak dollar and a strong Asian recovery are tag-teaming to boost exports, which is giving our manufacturing sector an early lift out of the recession. But American consumers don't have the firepower to assist in that lifting because, while the stimulus is working, it's not working well enough, or fast enough to keep joblessness in single-digits.
The solution, I think, has to be more stimulus spending. How we construct that stimulus is a big question, but I side with Noam Scheiber in thinking that, while tax-related job-stimuli like a payroll tax cut will likely be a part of the final equation, the administration shouldn't short-change direct government spending on infrastructure projects. As yesterday's CBO report concludes, we get our biggest bang-for-the-buck with direct government spending and infrastructure subsidies as opposed to tax cuts, even for middle and low wage families. It will be interesting to see if the makeup of a second stimulus differs drastically from the first.