US should consider second stimulus, says Tyson

Bloomberg
Posted: Wednesday, Jul 08, 2009 at 2357 hrs IST
Updated: Wednesday, Jul 08, 2009 at 2357 hrs IST

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Job loss pain crosses boundaries, sectors All that Goldman Sachs outsiders don’t get

: The US should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was “a bit too small,” said Laura Tyson, an adviser to President Barack Obama.

The current plan “will have a positive effect, but the real economy is a sicker patient,” Tyson said in a speech in Singapore on Tuesday. The package will have a more pronounced impact in the third and fourth quarters, she added, stressing that she was speaking for herself and not the administration.

Tyson’s comments contrast with remarks made two days ago by vice-president Joe Biden and fellow Obama adviser Austan Goolsbee, who said it was premature to discuss crafting another stimulus because the current measures have yet to fully take effect. The government is facing criticism that the first package was rolled out too slowly and failed to stop unemployment from soaring to the highest in almost 26 years.

Obama said last month that a second package isn’t needed yet, though he expects the jobless rate will exceed 10% this year. When Obama signed the first stimulus bill in February, his chief economic advisers forecast it would help hold the rate below 8%.

Unemployment increased to 9.5% in June, the highest since August 1983. The world’s largest economy has lost about 6.5 million jobs since December 2007. “The economy is worse than we forecast on which the stimulus program was based,” Tyson, who is a member of Obama’s Economic Recovery Advisory board, told the Nomura Equity Forum.

“We probably have already 2.5 million more job losses than anticipated.” Republicans, including House Minority Leader John Boehner of Ohio, seized on the latest labor numbers to attack the Obama administration’s handling of the economy.

Even Democrats have bemoaned the pace of the package’s implementation. House Majority Leader Steny Hoyer, a Maryland Democrat, said on “Fox News Sunday” June 5 that congressional Democrats are “disappointed” stimulus funds weren’t distributed faster. “The money is just really starting to come out in more significant amounts now,” Tyson said. “The stimulus is performing close to expectations but not in timing.” Tyson, 62, later told reporters that the US can afford to pay for a second package, even as the fiscal deficit soars. She said the budget shortfall is “likely to be worse” than the equivalent of 12% of gross domestic product that the administration forecast for 2009 and the 8% to...

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