The Need to Spend Stimulus Dollars Faster

The Republicans are hitting the administration hard over the 9.4% unemployment figure announced this morning and evidently the administration is taking note.

Vice President Biden announced today that they would be speeding up implementation of the stimulus program. The aim is evidently to get more money out the door throughout the summer.

The administration is obviously trying to get out of a box that it sees forming around its stimulus plan. To date only something on the order of $40 billion of the $780 billion stimulus bill is out the door yet the economy is showing signs of picking up or not getting much worse. If trends continue as they have for the past few months then there might be something on the order of a mild recovery underway by the third quarter.

The box, of course, is that unless the stimulus money gets out there quickly — remember the bulk of it isn’t scheduled to hit until 2010 and 2011 — the administration may well find itself in the middle of an economic recovery with lots of money yet to be spent. That’s a problem for two reasons. One, they can’t claim as much credit as they would like and two, pressures are going to build to not spend the money either because it would potentially overheat things or because it isn’t needed and therefore is no need to go so far into debt.

The only way out is either to have the recovery falter — no good– or to speed up spending. The problem there is that you risk really losing administrative control of the funds and a lot of bad press if it looks like the money is being wasted.

All one can do at this point is engage in conjecture but assuming that the recovery did really take hold later this year, the pressure as well as logic of backing off on stimulus is going to increase. That will put some pet Obama initiatives in peril so look for this to potentially become a big issue late this Fall.

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