The pressure is building for a second round of fiscal stimulus. Ben Bernanke has signed on to the idea and as the number of companies announcing major layoffs (Merck, Yahoo, Ford) it’s becoming obvious that the downturn is really just beginning. Here is a report from Merrill Lynch to their clients.
The September retail sales numbers have to be viewed in the context of a net loss of 760,000 jobs from the peak at the end of last year. Our crystal ball suggests that we are likely to see another three-million job losses in the coming 12-to-18 months.
What is critical is for Congress to resist the “mailing checks” type of stimulus plan that Bush proposed the last time. At the time it was proposed in January, I said it wasn’t going to help and it didn’t. What is needed is a block grant plan to the states to stimulate jobs. Governor Arnold Schwarzenegger wrote a letter to the Congressional leadership yesterday that pretty much nails the priorities.
A second economic stimulus package must include countercyclical aid to states through a temporary increase in the federal Medicaid matching rate and/or by providing direct grants to states…An increase in infrastructure spending can also provide near-term economic benefits when the appropriate projects are chosen. This will also have a significant economic multiplier effect that will create desperately needed jobs. I strongly recommend that Congress include additional funding for “ready to go” infrastructure projects in any economic stimulus package.
There are over 3000 “ready to go” infrastructure projects across the country that could start in the next 90 days, according to the American Association of State Highway and Transportation Officials.
If Obama wins he should ask Congress to come back to Washington on Nov. 5th for a lame duck session to get this new stimulus started.