The U.S. recovery approaches: But will it be strong enough?

An L-shaped recovery?

In other words, a pronounced recession followed by a recovery comprised of 2.0% GDP growth in Q3, 1.5-2.0% in Q4 and 1.5-2.3% in Q1 2010 won't be nearly big enough to meet the nation's needs: it won't feed either the earnings or the job creation bulldogs.

Hence, a second, large fiscal stimulus jolt may be needed. Market absolutists and conservatives will argue that too much of the first fiscal stimulus went to support state-level programs and wasn't 'fiscal stimulus,' strictly defined, but that's a half-truth. From a GDP growth standpoint, it would have been better if more of the $787 billion fiscal stimulus package went into infrastructure and related programs that quickly created jobs, but without the aid to the states, many more states would have had to raise taxes and further cut programs -- actions that would have further contracted the economy. And some states would have been in dire fiscal condition without that stimulus money.

In sum, 'fiscal stimulus I' is working, but it may not have been big enough, from a front-end stimulus standpoint. Hence, if the recovery is L-shaped or if growth flat-lines, Congress and the president should be prepared to pass 'fiscal stimulus II', on the order of $350-500 billion.

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Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.