As the economic results of the first stimulus continue to reinforce the fact that such measures are futile in trying to curb job loss, calls for a second stimulus have increased in volume. Obama administration advisor, Laura D’Andrea Tyson, joined the chorus this week in Singapore saying, “We should be planning on a contingency basis for a second round of stimulus.” The appeal for a second stimulus comes from an administration that has to date, only feigned fiscal responsibility. In fact, the federal government’s current deficit, 12% of GDP, is the highest since World War II. As a result of such deficits, the American taxpayer must continue to pay an increasing amount of interest, a whopping $565 billion this year alone, according to the New York Times.
Not everyone on Capitol Hill is ignoring the numbers. Congressman Erik Paulsen, from Minnesota’s 3rd Congressional district, spoke Tuesday about the explosion in the federal debt.
Paulsen is not alone in his criticism of federal spending. Economists Alan Auerbach from the University of California, Berkleley and William Gale, from the Brookings Institution, echo the Congressman’s worry. In their paper, “The Economic Crisis and the Fiscal Crisis: 2009 and Beyond” the two economists outline what they believe to be a bleaker, more realistic fiscal future. They believe the CBO’s federal deficit estimate relies on unrealistic assumptions. The CBO puts the cumulative deficit at $3.8 trillion, Auerbach and Gale project a cumulative deficit of $10.2 trillion.
Neither of the forecasts incorporate the impact of a second stimulus, which could send the deficit soaring even higher. As unemployment continues to rise, so will public pressure on Congress to act. Let’s hope they craft legislation based not on political posturing, but fiscal prudence.