To roughly paraphrase F. Scott Fitzgerald, "There are no second stimulus acts in American lives." Yet, with the recent data on the economy showing little improvement since the enactment of the $787 billion American Recovery and Reinvestment Act of 2009 (Public Law No. 111-5) ("ARRA"), there has been talk in the Obama administration and in Congress about whether another stimulus program is needed. Dr. Laura D'Andrea Tyson, a member of President Obama's Economic Advisory Panel, has increased this speculation when she stated at the Nomura Asia Equity Forum in Singapore that she believed Congress needed to pass another economic stimulus package, with an emphasis on infrastructure projects. Further, Pennsylvania Gov. Ed Rendell (D), in testimony Wednesday, July 8, 2009, before the House Oversight and Government Reform Committee, argued that a "stimulus only" bill is what is now needed: "I would like to see a second stimulus devoted solely to infrastructure . . . . It's what produces jobs, and produces orders for factories—American factories." The Hill (July 9, 2009), at 4.
Where are key economic indicators headed? Recent data on unemployment, wage growth, consumer confidence, and other indicators show few signs of economic recovery. If that trend continues during the second half of 2009, or if there are signs of widespread "malaise" (as may be reported by the University of Michigan in its "consumer sentiment index," and by other institutions), expect calls to continue, and increase, for another economic stimulus package to be enacted into law.
Is additional money needed or just faster implementation of the funds included in the first stimulus? Even with sagging economic indicators, there is a counter-argument to the call for a second stimulus, focusing on the need to efficiently and expeditiously distribute all the funds under the first stimulus. In fact, despite the fact that the ARRA was signed into law Feb. 17, 2009, only a small percentage of the infrastructure funds appropriated by Congress have been made available for obligation. For transportation projects, for example, the Department of Transportation ("DOT") recently reported that of the $17.5 billion available under ARRA, only $218.8 million, or 1.2 percent, of this has actually been spent (www.dot.gov/recovery). Most of this obligation delay can be attributed to the myriad federal and state rules that affect when individual projects can be started and how they may proceed through their various steps. Further, states were required under ARRA to first identify projects they consider to be "shovel ready" before receiving any funds. Virginia was the last state to do so and only submitted its shovel-ready list to the DOT a few weeks ago. Certainly the economy will increasingly benefit from additional stimulus monies becoming available and being obligated.
Is there an appetite in the Obama administration and Congress for another stimulus bill? Even if all economic arguments supported the need for additional funds, the political arguments remain as to whether and how to provide for added federal stimulus outlays. Reaction among congressional leaders in the Democratic majority, for example, has been cool to another stimulus. One reason is that the need for a second stimulus could very likely support the conclusion that ARRA was ineffective and a waste of taxpayer funds. We would expect that congressional Republicans, who almost unanimously opposed ARRA, would make that argument strenuously. They already are citing the forecast by the Obama administration at the time of passage of ARRA that it would lead to an unemployment rate below 8 percent. Currently the rate is 9.5 percent, the highest in 26 years. We note further that despite the remarks of Dr. Tyson, who made her comments in a private capacity and not as an advisor to the Administration, no representative of the Obama administration is calling for another stimulus. And even if the administration and congressional leaders supported a second stimulus, it would have to be considered in a congressional calendar packed with high-profile bills facing lengthy negotiations, including health care and climate change legislation. Finally, it is not clear that a second stimulus would focus on infrastructure projects. House Minority Whip Eric Cantor (R-Va.-7), for example, has been calling for tax cuts as part of a second stimulus, not new spending.
Possible Strategy Development. The increasing calls for a "Second Stimulus," perhaps one targeted more specifically to transportation, as suggested by House Transportation and Infrastructure Chairman James Oberstar, or to the development of an "infrastructure bank," as suggested by Gov. Rendell, suggest certain tactical advantages that might be gained by client focus on the legislative process. Joining the debate, and framing the discussion, might be the way to direct new congressional policy and spending. .