A nother attempt will soon be made to jolt the American economy only nine months after passage of the biggest economic stimulus package in U.S. history. Yet Americans are so averse to government spending that the White House doesn't dare call the further assistance it is planning a second "stimulus."

Funny thing about Americans. They seem to expect recovery from a job-destroying recession with few equals in history without further assistance from Washington.

Recent polls show 65 per cent of Americans oppose an encore to the federal stimulus package of last winter. Already, 51 per cent think Washington is spending too much on stimulus.

Yet the U.S. jobless rate continues to rise. It's now officially just under 9 per cent. It will rise to 10 per cent-plus by year's end and stay there through much if not all of 2010.

A staggering 15 million Americans are out of work. Seven million Americans lost their jobs since the financial markets crashed beginning in September 2008. The comparable figure for Canada is 410,000 job losses, a smaller percentage of our workforce than in the U.S.

Taking into account Americans who have given up looking for work, or are underemployed in temp jobs, the rate of Americans with no, or woefully insufficient employment, is an astonishing 17 per cent.

But so effective have U.S. conservatives been in depicting government stimulus as "theft from future generations," as John McCain puts it, that even at their moment of maximum suffering, a majority of Americans think their federal government is spendthrift in its efforts to turn around the economy.

Maybe pollsters only canvass Americans who still have jobs. Unlikely in the extreme, of course, but how otherwise to explain this counterintuitive public sentiment?

The answer is that Americans are bailout-weary, after the feds spent upward of $2 trillion (U.S.) to stabilize the banking system and rescued General Motors and Chrysler. It doesn't help that Main Street has seen its tax dollars used to bail out banks that continue to lavish with bonuses executives who helped tip the global economy into the worst downturn since the Dirty Thirties.

Neither does it help that since the stimulus package was passed, the jobless rate has continued to increase. With a debate in coffee shops across the land about the usefulness of the stimulus, it's tough to make the case for adding to the record $1.4 trillion deficit this fiscal year with another round of stimulus spending.

Most Americans support the healthcare reform proposals making their way through Congress. But they're suffering sticker shock at the cost, which is estimated at upward of $1 trillion. Ultimately, the reforms are calculated to reduce the soaring cost of U.S. health care. But upfront expenditures on, for instance, electronic medical records, are a classic case of spending money to make money – or, in this case, spending money to create efficiencies that will reduce costs long term.

Finally, the stimulus has so far been largely invisible.

"As you drive around town, it's difficult to visualize tax rebates or aid to states – the fast-acting components of the stimulus," writes Slate's ace economics correspondent Daniel Gross. "But as I drive around my town today, I can see workers labouring at a $4-million stimulus-backed road project that is just getting started and will run through the spring of 2011."

The truth of the matter is that the original $787-billion stimulus package sought and won from Congress by U.S. President Barack Obama – a bigger sum as a percentage of the economy than Franklin Roosevelt's first-year New Deal outlays – has worked as far as it goes. The White House estimates that about one million Americans – mostly firefighters, police, teachers and other state employees who were designated to be laid off – have been spared the loss of their jobs.

A consensus of U.S. economists, including conservatives, believe the stimulus has pulled the U.S. out of recession and got the economy growing again for the first time since December 2007.

By design, the epic stimulus package was "back-loaded," with most of the spending to be done next year. As of August, only 19 per cent of the $787 billion had been spent. As I've written before, Obama, more fiscally conservative than most progressives realized until now, wanted to assess the impact of the stimulus in the hope that he wouldn't have to spend the entire amount. Obama wanted it spent slowly in order to avoid a boondoggle, in his mission to restore confidence in government competence.

In that, Obama has thus far succeeded. Felix Salmon, respected economics blogger for Reuters, asked recently: "Can anyone give me an example of something with the following three characteristics: 1) It is a policy initiative of the current Obama administration; 2) It was significant enough in scale that I'd have heard of it; 3) It wasn't fundamentally extremely well-managed during the execution."

The good news is that the 53 per cent surge in U.S. stock-market values since their March nadir signalled an economic upturn. Sure enough, the U.S., Canadian and most major European economies are growing again. Starting this fall, there has been a stronger and faster recovery in U.S. corporate profits than expected.

A resumption in job creation typically is the last phase of a recovery. Skittish employers must be convinced a recovery isn't just a hiccup but is sustainable before they expand their payrolls.

Obama and Congress can't wait that long. So there will be a raft of non-"stimulus" stimuli in coming weeks and months.

These will include an extension of jobless benefits for another month or longer, and of the first-time homebuyer tax credit that helped arrest the dreadful plunge in U.S. housing values.

There will be more funds for cash-strapped state governments, which were wrongly cut out of the initial stimulus bill in vain hopes of attracting Republican support. Food-stamp coverage will be expanded, along with the existing program to enable the newly jobless to keep their employer-provided health insurance. And there will be tax cuts for business job-creation efforts.

Realistically, with so much of the original stimulus yet to go out the door and, with likely passage of health care reforms later this year that will bring cost relief to millions of U.S. households, the Democrats should not fear for their prospects in the 2010 elections. Yet that's no small part of the motive behind the coming "Son of Stimulus" efforts of a Democratic Congress heading into next November, when one-third of the U.S. Senate and the entire House of Representatives is judged at the ballot box.

As Larry Mishel, president of the liberal Economic Policy Institute, recently told the Washington Post, "It's such a desperate situation that we need to do things that move the dial."

And I won't be the one to argue over Vice-President Joe Biden's comment this week that if you're out of work, no matter what the economists say, for you, it's still a depression.





dolive@thestar.ca

Blog: The Great Recession www.thestar.blogs.com/recession