Back in February, Obama signed the federal stimulus legislation of $787 billion. It was hailed as a necessary fix for the slumping economy and through the stimulus package President Obama created great expectations among Americans. The bill was finally pushed through because there was this great sense of urgency, implying that without the stimulus package, the unemployment rate would be over 10% and the economy would get worse.

The result of Obama’s oversold plan is still 10% unemployment rate despite the $787 billion stimulus package. October marked 22 months of consecutive job declines with nearly 16 million Americans jobless.

Even though the first stimulus has been a failure, Obama and the Democrats are currently talking about a second round of the stimulus. Although it is still a little bit too early to see how much it will actually cost, the second stimulus may run into hundreds of billions of dollars at a time considering that the federal deficit is now at record high, partly due to the first stimulus package.

We are not sure yet what the second stimulus will look like but the proposals sound pretty much like the first one. Those in favour of the second stimulus are mentioning road projects, tax relief or loans to small businesses, extension of unemployment benefits, and paying part of some employee salaries to avoid layoffs.

You will probably not hear the term “second stimulus package” when you ask congressional leaders. In order to dissassociate the second stimulus from the first one, they are calling this plan a “job creation” package as opposed to “stimulus” package.

But where will the money come from to fund the new package? Some mention the unspent money from Troubled Asset Relief Program to bail out financial institution. Some mention a possible source which takes aim at recovering Wall Street with a 25-cent tax on every stock transaction. It is most likely that the federal deficit of $1.4 trillion last year will reach $1.58 trillion this fiscal year even without the second stimulus. But still, Obama administration promised to reduce the deficit in the future although it appears that he is ready to accept higher deficits in return for jobs.

The idea of going for a second stimulus appeared because of the questions that were raised about the first program. It was claimed that the first stimulus created or saved over 1 million jobs but this figure are still in dispute. There was also a claim that the reason why the stimulus didn’t save as many jobs as it was supposed to was because the first stimulus was not big enough compared to the size of the problem and it needed another stimulus to actually have a great impact on the unemployment rate.

The bill is being hurried to reach Obama by January. Nevertheless, having doubts on the effectiveness of the first stimulus, lawmakers should slow down before rushing ahead with more spending.

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