As Congress breaks for August recess on the same day that the employment report revealed the country saw its sixth straight month of job loss in July, questions are flying about the need for a second economic stimulus. With the November election fast approaching, members of Congress are split on the need for another round of rebate checks, and economists are concerned about the politics surrounding the second stimulus.
Josh Bivens, an economist at the Economic Policy Institute, said he thinks that Congress will pass a second stimulus in November, despite the mounting deficit.
"My best guess is that we will pass something," he said, noting that the country should "go for broke" to get the economy back on track.
Bivens suggested a "minimum" of $100 billion to jump start the slowing economy, although he predicts Congress will pass a stimulus in the range of $50-$75 billion.
However, the bill won't likely pass until after the Presidential election, Bivens added. His sentiments were echoed by some Democratic members of Congress as they gathered prior to adjournment for August Recess.
"I think clearly the economic statistics we've seen this year are pretty stark: the highest budget deficit in history and now spiking unemployment, job loss," said House Majority Leader Steny Hoyer, D-Md., in a brief interview with RTT News. "All of that leads us to the conclusion that a second fiscal stimulus package is warranted."
Rep. Charles Rangel, D-N.Y., the chairman of the tax-writing Ways and Means committee, said Friday's job numbers highlight the need to move forward with a new round of relief for American consumers struggling with higher prices for energy and food.
"This really emphasizes how important it was, because whatever we did last time was completely absorbed by the increase in gasoline prices," he told RTT News. "So we're really basically right back to where we were before. So I will be encouraging a package … Yes, I think we'll have it."
However, the prediction is not shared by all. House Minority Leader John Boehner, R-Ohio, declined to comment on the jobs report, telling RTT News he hadn't seen the latest numbers.
Dean Baker, an economist at the Center for Economic Policy Research, said he doesn't foresee Congress enacting a second stimulus - at least until 2009.
"Congress won't enact a second stimulus," he told RTT News. "Democrats in Congress will try and pass something, President Bush will veto it, or they might stop it on procedural grounds in the Senate."
The political atmosphere surrounding the countdown to the November election will halt the passage of the stimulus, Baker said, because even if it is passed, a second stimulus won't actually help the economy before the election.
However, the second quarter GDP numbers were greatly helped by the first stimulus, both Bivens and Baker agree.
"It's true that the economy would be doing worse off than before we had the stimulus package, we would have had a much worse report in the second quarter," Bivens said, adding the positive growth was "pretty much entirely due to the one time boost of the rebate checks."
However, Baker predicts that without the help of a second stimulus, the second half of the year could be worse than the first.
"Consumer spending will trail off" he predicted, following the boost in July and August from the rebate checks.
The amount of boost that the checks give the economy will wane every month, he added, and by September there will be "very weak growth, if any with consumption."
"August will look bad, September worse, October even worse," Baker said.
Michelle Meyer, an economist with Lehman Brothers, offers a similarly dark outlook.
"I think on balance it's roughly consistent that you're going to see continued weakness in the economy, the second half of this year is going to look weaker than the first half of this year," she told RTT News. "And that's because you have all these shocks to the economy at the same time."
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