Is the Stimulus Spending Just a Start?

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Economy: Seven-hundred eighty-seven billion dollars apparently doesn't go as far as it used to. Even before the ink was dry on the stimulus bill, the president and his deputies were hinting it may not work as promised.

Last week, when President Obama was in Peoria, Ill., selling the stimulus bill, he heaped praise on the spending plan, calling it a "once-in-a-generation chance to act boldly" that would "be a major step forward on our path to economic prosperity."

He predicted that "once Congress passes this plan and I sign it into law, a new wave of innovation, activity and construction will be unleashed all across America."

Now with the $787 billion on the books — an amount greater than the entire federal budget in 1982 — the administration is suddenly in full expectation-lowering mode, throwing out strong hints that it may have to go back for second helpings in a matter of months.

"Signing Stimulus, Obama Doesn't Rule Out More," is how the New York Times put it. And, indeed, Obama sounded almost dour about the bill he had so aggressively pushed to get passed.

Gone was all the bold talk of unleashing innovation and activity. Now it's just "the beginning of what we need to do."

Obama deputies were even more downbeat. Last weekend, after the bill was safely through Congress, administration press secretary Robert Gibbs predicted that the "economy is going to get worse before it gets better."

Both he and senior adviser David Axelrod are now saying that the unemployment rate is likely to go as high as 10%, even with the stimulus.

This alone is a stunning admission, since just before the stimulus plan was signed into law, the Congressional Budget Office forecast unemployment would peak at about 9% — without passage of the gargantuan plan.

The shift in tone has been so sudden that even the mainstream press has noticed. On Tuesday, a reporter pointed out to Gibbs that the administration seemed to be taking "a wait-and-see kind of approach" to the stimulus, asking whether that suggests it will seek a second round of stimulus spending.

Gibbs' response: "There are no particular plans at this point for a second stimulus package at the moment. I wouldn't foreclose it."

So what can explain all this cold water? As we see it, there are four possibilities:

1. The administration discovered in the past couple of days that the economy is far worse that it thought. Unlikely, unless the economic team doesn't know what it's doing.

2. The administration has seen what it can get by scaring the public, so why not try it again? With much of its long-term spending agenda enacted, a few more months of catastrophe talk and it could even score nationalized health care. Maybe, but we hope that's far too Machiavellian for this crew.

3. The president and his team have spent so much time and energy talking down the economy that it can't seem to stop. As Obama might put it, "Old habits are hard to break." This is within the realm of the conceivable.

4. The most likely explanation: The administration is quietly coming to understand what critics of the bill knew all along. It spends huge sums of money, but does so in ways that will do little to stimulate the economy in the short term.

If true, it would amount to the most expensive learning curve in the history of mankind.

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