Stimulus 2.0

Robert J. Samuelson argues against a second stimulus:

The rap on Stimulus 1.0 is that it hasn't yetas promisedreduced unemployment. Boosters retort that unemployment would have been worse without it, and more than half hasn't even been spent. Detractors argue that the benefits of "stimulus" packages are overrated. Underlying this dispute is an academic argument about the "multiplier": whether increased stimulus spending and tax cuts translate into large increases for the overall economy, or whether the effects are offset. Consumers might save most tax cuts, or bigger deficits might raise interest rates and crowd out private borrowing.

In truth, there is no "right" answer; the multiplier will vary depending on economic circumstances. In this case, the Obama administration is more plausible than its critics. In early 2009 consumer and business spending was collapsing. The stimulus helped stabilize the economy; it's saved jobs that otherwise would have been lost. Interest rates didn't rise. But just because the earlier stimulus was justified doesn't mean that another would be, because circumstances are changing.