Is A Second Economic Stimulus Package On Its Way?

I indicated earlier that I didn’t think that a second economic stimulus package would be considered until after the elections - and it looks like that is, in fact, the case. I’m actually still confident that any stimulus package which includes “tax rebates” would not result in checks being mailed out until the new year.

Nonetheless, Democratic leaders have indicated that they will pursue a second economic stimulus package as soon as two weeks after the elections. The package is said to include extended jobless benefits, money for food stamps and maybe - just maybe - another tax rebate. The cost of the additional package is estimated to be $150 billion.

But talking is just that - talking. The real challenge is that even if the Democrats won the White House, any attempts at pushing new legislation next week means negotiations with the current President; most agree that President Bush, who remains in office through January 20, 2009, is not likely to agree on the House version of the bill as it is contemplated today.

House Speaker Nancy Pelosi believes that some stimulus is necessary. Senate Majority Leader Harry Reid agreed, saying:

“recent developments only reinforce the need for additional action to reinvigorate the economy.”

The House had passed a $61 billion economic stimulus package just before the election break but the package was never really intended to become law; the GOP Senate had already indicated opposition to the bill. That package included jobless benefits, Medicaid assistance and improvements to the nation’s infrastructure. There were no rebate checks included in that bill.

With respect to a new stimulus package, Republicans are said to be “skeptical of a second stimulus” but are not necessarily opposed. The main concern is the proposed cost of the plan, considering the state of the economy. The nonpartisan Congressional Budget Office has reported that the federal government will run a near-record deficit of $407 billion this year and next year’s deficit could reach a record $438 billion. This does not include expenditures related to the bailout.

The Democrats in the Senate appear to echo the Republicans’ concern on some level. When speaking about a second stimulus package, Sen. Charles Schumer indicated support for a package that could range from $50 billion to $75 billion. A package of that size would almost certainly not include additional rebate checks.

So even if the House gets its way, don’t get too excited: all indications are that rebate checks would be limited. The last stimulus package included $100 billion of rebate checks and still left many taxpayers out completely. Even the “best case” scenarios being presented hint that a second round of rebate checks would total less than $65 billion, meaning that even more taxpayers would be left out of the second package.

It’s that last part that the Democrats have to keep in mind. The last round of checks left many angered that benefits were not extended to all taxpayers; to then extend a second round of benefits to fewer taxpayers (approximately 1/3 less) may cause widespread dissension.

What do you think? Good idea or not?