New Stimulus Plan: The Fiscal Menace or The Economy Strikes Back?

(Or perhaps Episode IV: Obama’s New Hope.)

In a few weeks the Senate will be debating another stimulus plan. This one is billed as a jobs creation package with a $154 billion price tag. It’s an extension of the American Recovery and Reinvestment Act of 2009, and its purpose is to increase public funding for some of the “greatest hits” from last year’s economy stimulus.

The new bill in its current form, after passing the House of Representatives last month, calls for new funding of $50 billion to be used for infrastructure, $50 billion for state aid, $2 billion for green technology, $2 billion for improving water quality, $1 billion for police officers, and under $1 billion for other items such as Amtrak rail improvement, airport projects, and living assistance for the poor.

It’s going to be difficult getting this bill through Congress after the chaos surrounding the health care bill. The Democrats may have missed their opportunity to get additional stimulus passed without significant concessions to Republicans.

Here is my prediction: If the economy doesn’t recover soon, the stimulus will be judged a failure. Democrats will blame the failure on the inability of the Congress to pass a strong enough stimulus bill and Republicans will instead blame the idea of a stimulus based on government intervention in the market. If, on the other hand, the economy does recover, Democrats will give the credit to the stimulus and Republicans will praise the economic cycles or the free market. Both sides will support their position with data from polls, surveys, economic studies, and think tanks, none of which are ever as independent as they say they are.

What is your opinion about another economic stimulus? Is more cash injection needed to jump-start the economy? Is it more important to stop adding to the federal deficit? And if more stimulus is needed, is $154 billion enough to make a difference?