President Obama and Vice President Biden have been inferring that a trillion dollar stimulus might be needed to spur the economy out of recession, but that kind of loose talk is galling to policymakers at the Federal Reserve and at other central banks around the world, economist Irwin Seltzer wrote in The Times of London.
"The president has his team hinting that another stimulus may be on the way. That prospect sends chills down the spines of deficit hawks at the Fed and in the financial community,” Seltzer wrote.
“Roger Altman, chairman of Evercore Partners, an investment banking boutique, and Bill Clinton's deputy secretary of the treasury, says the deficit is already so large that sometime soon, perhaps by 2010, the U.S. will have to raise taxes," he added
Seltzer doesn’t see the need for a second stimulus, especially since the promised job creation by Obama has yet to materialize from the first one.
Seltzer wrote that banks, however, do seem to be returning to a "semblance" of health. Some have raised enough funds to repay the feds the money from the bailouts given when policymakers panicked and thought the "financial system was on the verge of a collapse."
The banks have some way to go, but the anxiety that the system would collapse has disappeared, he said.
Still, Seltzer wrote, Obama and company need to be a bit more humble before they go out and demand another trillion dollars in deficit spending authority.
"The Obama administration's economists got it wrong," Seltzer said. "When the president was pressing for the passage of the stimulus package, they predicted it would creation millions of jobs and cap the unemployment rate at about 8 percent.’’
Congress gave the president the $789 billion he asked for to jump-start the economy. But the 2.5 million promised jobs have failed to materialize.
“The label 'stimulus' was slapped on a grab bag of spending projects that could not be initiated in time to boost the jobs market," Seltzer wrote.
This kind of fiscal sleight-of-hand might make con man Bernie Madoff blush. Katherine Mangu Ward, wrote in Reason Magazine, that one of the projects funded by the stimulus was a "turtle crossing" in Florida.
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