Another Stimulus Needed? G8 Leaders Say: Quite Possibly
As the leaders of the northern hemisphere's eight most important economies meet in Italy right now, they appear to be of two minds: Governments need to start finding ways out of the massive and unprecedented incursions they've made into the private sector over the past year, even as some nations -- such as the U.S. -- need to consider additional government stimulus plans.
This is according to a G8 communique obtained by the Associated Press. President Obama is joining Italian host and premier Silvio Berlusconi and the leaders of Britain, Germany, France, Canada, Russia and Japan in the quake-ravaged central Italian city of L'Aquila beginning today and running through Friday.
"We will take, individually and collectively, the necessary steps to return the global economy to a strong, stable and sustainable growth path," the draft communique said.
The communique said that the U.S., Britain and Japan cannot rule out spending more taxpayer money on attempted government stimulus, the AP reports. Germany, meanwhile -- which instinctually fears inflation -- is urging restraint.
The G8 communique, which it is fair to say represents the general consensus of the leaders, comes as Washington is starting to drop hints about possibly passing a second taxpayer-funded stimulus as concerns that the first one -- $787 billion, approved earlier this year -- is not working fast enough.
The Post's Lori Montgomery had a good report on that this morning, which you can read here.
Here's the problem: The administration is reacting to last Thursday's surprisingly bad unemployment news, which showed 467,000 jobs were shed in June, far more than most expected. This pushed the nation's official unemployment rate to 9.5 percent and the unofficial rate -- which The Ticker believes to be a truer measure -- to 16.5 percent.
Christina Romer, one of the president's top economic advisers, was repeatedly pressed on CNBC earlier this week on whether a second stimulus is needed. Though she wouldn't say yes or no, she kept saying: This administration will do whatever is necessary to improve the economy.
As Lori points out, only 14 percent of the stimulus plan has been spent. We knew this all along: When it was passed, the Congressional Budget Office predicted that it would take until the end of next year for even 75 percent of the stimulus to reach all those projects we were told were "shovel-ready."
The question is: Can the administration and congress be patient enough to find out if the stimulus will work and do they have the will to watch unemployment hit 10 percent and probably climb higher as this economy recovers, slowly, largely on its own?
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