A July 7 editorial in the Chicago Tribune maintains that a second stimulus plan would be a mistake, even though national unemployment is rapidly approaching double-digit levels and data show that the first stimulus wasn’t designed for such a weak economy.
EPI’s Ethan Pollack responds:
The Chicago Tribune editorial was right to withhold judgment on the effectiveness of the existing economic recovery package, but it completely mischaracterized the arguments in favor of another round of stimulus.
The writer likened the situation to making a turkey dinner. If you get hungry before it’s ready, the reasoning went, you don’t put another turkey in the oven-you wait until the first one is done. But the lesson is wrong. The problem isn’t that we need stimulus faster, it’s that we now need more of it than we expected. The first round of stimulus was designed for an economy that would peak at 8.8% unemployment by the fourth quarter of 2009. Four months later we’ve hit 9.5%, and the trend points toward 10% before summer’s over.
Furthermore, the next round of stimulus should focus on what the first round underfunded or ignored: aid to cities and states, school construction, aid to transit agencies (to avoid fare increases and service cuts), and more support for low-income families.
To correct the analogy, we’ve already got a turkey cooking, but now 10 hungry friends unexpectedly have shown up for dinner. Why wouldn’t we put another bird in the oven?