"It's critical that the Obama administration prepare a second stimulus to sidestep a major downturn"

[Better Believe It]

9 reasons the economy won't recover soon
Job losses over the past 6 months have exceeded anything we've experienced since
World War II, and the number of long-term unemployed is at an all-time high.
By Mortimer Zuckerman, U.S. News & World Report
July 20, 2009

.... households soon will have received their full portion of the stimulus package. How could this happen when Washington has thrown trillions of dollars into the pot, including the famous $787 billion in spending that was supposed to yield $1.50 in growth for every dollar spent?

For a start, too much of the money went to transfer payments -- Medicaid, jobless benefits and the like -- that do nothing for jobs and growth. The spending that creates jobs is new spending, particularly on infrastructure. It amounts to less than 10% of the stimulus package today.

Second, while the stimulus package may have been well intentioned, it was too small and too badly constructed to get money into the economy fast enough to replace lost consumer and business spending and to slow unemployment.

The program was supposed to be about jobs, jobs and jobs. It wasn't. The recovery act included thousands of funding schemes for tens of thousands of projects, and those programs are stuck in the bureaucracy as the government releases funds with typical inefficiency.

An additional $150 billion, allocated to state coffers so as to continue existing programs like Medicaid, did not add jobs. Hundreds of billions of dollars were set aside for tax cuts and for benefits for the poor and the unemployed, and that did not add jobs. Now, state budgets are drowning in red ink as jobless claims and Medicaid bills climb.

So what kind of second-act stimulus program should we look for? This time, it should not be an excuse to pass a lot of programs that don't really have a multiplier effect on job creation and economic growth.

Given the trends, it is critical that the Obama administration not play politics but begin to prepare a second stimulus program to sidestep a major downturn. It will be possible this time to provide much more rapid government support to infrastructure spending that will maximize the creation of jobs.

The time to get ready is now.

Please read the complete article at:

http://articles.moneycentral.msn.com/Investing/Extra/9-reasons-the-economy-wont-recover-soon.aspx?page=1