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The problem with Obama's stimulus plan

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In comments to reporters in Chicago today, President-elect Barack Obama indicated that he was going to push for a stimulus package -- a really big one.

"Not only do I want the stimulus package to deal with the immediate crisis, I want it also to lay the groundwork for long-term sustained economic growth," Obama said in a quote from The Wall Street Journal. "With our economy in distress, we cannot hesitate and we cannot delay."

To be sure, time is of the essence. The economy is in free fall and may not improve until the end of next year. Investors have as much confidence in the stock market as Philadelphia Eagles fans have in quarterback Donovan McNabb and head coach Andy Reid. (For non-sports fans, the Eagles are the NFL's answer to Citigroup Inc. (NYSE: C), careening from one disaster to another. It's too bad government regulators can't take over the Eagles for bankrupt football play.)

The question Obama's team will face is how much size matters. Remember how the $180 billion stimulus package signed by President Bush was supposed to get the economy out of its funk? Retailers of every stripe devised clever marketing campaigns to get consumers to spend their found money from the government. And you know what? The economy was stimulated for a while.

Unfortunately, the sages in Washington who dreamed up this idea probably did not imagine that the economy would get much worse, which it did. Many people -- myself included -- socked away their checks in the bank. When the economy began to plunge further, Democrats began to agitate for a second stimulus check, so it's no surprise Obama is pushing for it as well.

I agree with Obama, for whom I volunteered in the recent election, that a stimulus bill is needed. The question is the cost. Since the first bill did not do much for the economy, will the new one need to be twice as large to get lasting impact? Three times? Ten times? The numbers get truly frightening considering we will probably need other jolts to the economy as well.

Obama is promising an economic stimulus package, the creation of 2.5 million jobs and increased infrastructure spending. I certainly hope he can pull of this hat-trick. Otherwise, paying for the stimulus will be the least of our worries.

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Last updated: July 10, 2009: 06:58 AM

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