Will the U.S. economy get a 2nd stimulus?

Influential voices are suggesting that the U.S. economy needs a 2nd stimulus package.Warren Buffett while agreeing that the original cause for the recession was the housing bubble says that there probably should be a 2nd stimulus now,but he cautions that he would not expect miracles from it.His views are echoed by Princeton University economist and Nobel Prize winner Paul Krugman.He says that the U.S. economy is stabilizing and may have bottomed out.He estimates that the stimulus plan may have saved a million jobs so far.Yet he feels that another stimulus plan,one that is directed at state and local governments as well as infrastructure spending is required.This is particularly important because faced with revenue shortfalls due to the slowdown many state governments are either cutting expenditure or are raising taxes,with both actions being contrary to what is required to pull out of recession!

Some of President Obama's advisers are also veering around to this view.Among them is Laura Tyson who is former chair of the U.S. President's Council of Economic Advisers during the Clinton Administration.She is amongst those who feel that the $787 billion stimulus package passed earlier this year was not large enough.

What is nagging this school of thought is that unemployment continues to rise and may cross 10% by the end of the year.When the stimulus bill was passed it was expected that the unemployment rate would be capped at 8%.This hasn't happened because the economy turned out to be worse than experts forecast on which the stimulus program was based.

So far Obama's response to these voices has been a definite 'no'.He has urged patience to allow the stimulus to work as planned.He points out that in a recession unemployment recovers more slowly than other measures of economic activity.International speculator and financier George Soros agrees with Obama.He too believes a 2nd stimulus is not needed as rising interest costs could easily derail a weak economic recovery.

There are several reasons why Obama is avoiding committing himself to a 2nd stimulus package at the moment.While he urges people to be patient and allow the full effects of the present stimulus to kick in it is difficult for him to simultaneously push for another package.More important is the impact a 2nd stimulus would have on the budget deficit.As it is the deficit is expected to reach $1.82 trillion in fiscal 2009.This is causing concern not just at home but more importantly abroad as well amongst leading lenders to the U.S., notably China and the Middle East.Experts warn that higher budget deficits could raise interest rates on government debt to as high as 7%.In this situation even a Democratic majority may not be enough to get another stimulus through Congress.