White House Is Pushing For Second Round Of Stimulus Money For States And Cities. UPDATED

As progressives, bloggers and experts like Paul Krugman said at the time, cutting the stimulus package the first time around to make Republicans h

As progressives, bloggers and experts like Paul Krugman said at the time, cutting the stimulus package the first time around to make Republicans happy only weakened the stimulus effect to the point where it was enough to deter the worst effects of the financial crisis, but not enough to fix it. (Kind of like having a bacterial infection and taking half a dose of antibiotics.)

Krugman said then that he doubted the political climate would permit a later stimulus package, and he was right - which is probably why David Axlerod is tying himself in knots to avoid calling it that:

President Obama wants Congress to spend more money to help states and localities struggling with huge deficits. But he does not want to call it a stimulus package, apparently.

Mr. Obama has intimated in the past that the federal government’s job of propping up the economy was not yet done. Last week, he sent a letter to Congress supporting efforts to pass two separate measures totaling as much as $50 billion in aid for states and cities.

With states still facing large budget shortfalls, Obama wants to minimize the potential loss of teachers, law-enforcement officers, and firefighters. He estimates that as many as 300,000 teachers could be laid off. In this way, the money would largely pick up where the $787 billion federal stimulus bill left off.

Yet on NBC’s “Meet the Press” Sunday, Obama adviser David Axelrod plumbed the depths of the English language in order to try to avoid calling the money a stimulus.

In the end, he conceded: “We should not be too careless about pulling out of our stimulative efforts too quickly.”

Mr. Axelrod’s discomfort is an acknowledgment that the American Recovery and Reinvestment Act did not deliver in precisely the way it was promised. Touted as the only way of keeping unemployment below 10 percent, the unemployment rate tipped 10 percent anyway.

Obama’s push for more stimulus, however, suggests that the administration believes that the stimulus package blunted the worst of the recession – as the White House has repeatedly argued. The state and city stimulus is a bid to repeat the process this year for states and localities that cannot run deficits by law.

Critics argue that this tactic has created only the veneer of a recovery. Jobs numbers released June 4 showed that the vast majority of new jobs were Census jobs paid for by the government. The private sector created only 41,000 jobs – its worst performance since January.

UPDATED: John Amato:

Paul Krugman has been attacking the lurch towards 'Fiscal Austerity' for a few days becoming very shrill in the process. That's always a good move. He uses Ireland and Spain for his example.

But I suddenly realized this morning that there’s yet another question for the deficit hawks: what evidence do you have that fiscal austerity of the kind you’re demanding would reassure markets, even if they did lose confidence? Consider, if you will, the comparative cases of Ireland and Spain.

The countries responded differently, however. Ireland quickly embraced harsh austerity; Spain has had to be dragged into austerity, and still faces major political unrest.

--

So, I’m glad to hear that Ireland’s stoic acceptance of austerity is reassuring markets; it must be true, because that’s what everyone says. Because if I didn’t know that, I might look at the data and conclude that markets actually have less confidence in Ireland than they do in Spain, and that austerity in the face of a deeply depressed economy doesn’t actually reassure markets at all. But hey, what are you going to believe: what everyone knows, or your own lying eyes?

And as Digby says:

I feel as if we are watching a slow motion train wreck, mouths agape, powerless to do anything to stop it --- the Very Serious People are all on board, assured in their own minds, for different reasons, that history has ended and nothing that came before can possibly be of any consequence.

In fact, I feel exactly the same way I felt in the lead up to the Iraq war.

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