When the $759 billion stimulus bill was passed earlier this year, promises were made by Congress and the president that this massive spending bill would keep us out of an economic abyss. Now, the unemployment rate is at 9.5% and rising as fast as summer temperatures in Vegas.

What happened?
According to Vice President Biden in a July 5 interview he gave to ABC's "This Week", "We misread how bad the economy was, but we are now only about 120 days into the recovery package."

The misreading part makes sense because the speedy passing of a stimulus bill with nearly as many pages as Tolstoy's "War and Peace" was debated on the Congressional floor for about as long as it would take to read Dr. Seuss' "Cat in the Hat."

He also makes a lot of sense on the 120 days because only 10% of the money has been spent. However, the rumor mill is abuzz with talk of a second stimulus bill.

Steps Towards Stimulus
Before any second stimulus bill is discussed, the following needs to happen in congress:

  1. Congress needs to be less stingy with the current package and distribute the money faster. If we are destined for an economic abyss, the government needs to ante up or rethink the investment and send part of the money to reduce the growing budget deficit – which is a strategy often used by corporations. In business school they teach that if you don't have a good use for the money, it's best to give the money back to your debtors.

  2. The non-partisan Congressional Budget Office (CBO) needs to be thought of as a trusted advisor. The CBO, which is staffed by financial analysts and policy advisors, crunched the numbers and said that in a report that the stimulus would hurt the economy in the long run because the massive debt would crush growth and actually shrink the economy – even if there is short-term economic rebound.

  3. Consider investment or tax breaks for private industry. According to the Small Business Administration, small businesses with under 500 employees represent 99.2% of all employers.

  4. Debate any spending bill – and multi-billion distribution of the current stimulus funds - for at least as long it would take to read a short novel.

There's no doubt that the economy is not in its best state, but a clear and focused plan has to be developed. And it seems the best Stimulus 2.0 that could happen would be to carefully mull over and distribute the funds from Stimulus 1.0 in a way that will create an economic boom not a deficit headache.

For further reading, checkout Free Market Maven: Milton Friedman, Do Tax Cuts Stimulate The Economy?, Is The U.S. Government Too Big To Fail, Fannie Mae, Freddie Mac And The Credit Crisis Of 2008, and Dialing In On The Credit Crisis.

Related Articles
  1. Investing

    Which GOP Candidate Brings What to the Table?

    What are the major GOP presidential candidates' economic plans and how do they differ?
  2. Professionals

    10 Must Watch Documentaries For Finance Professionals

    Find out about some of the best documentaries that finance professionals can watch to gain a better understanding of their industry.
  3. Economics

    Benefits of China Changing It's One Child Policy

    China's one-child policy is changing, and investors are looking for ways to cash in. The reform might not have the effects that many anticipate, however.
  4. Entrepreneurship

    START-UP NY: How a Tax-Free Zone Would Work

    START-UP NY is an initiative designed to attract companies to New York State by giving them 10 years of tax breaks. Sounds good, but is it a success?
  5. Economics

    Explaining Capital Flows

    The movement of money for investing, trade or business production, is commonly referred to as capital flows.
  6. Economics

    Explaining Economic Integration

    Economic integration reduces or eliminates trade barriers among nations, and coordinates monetary and fiscal policies.
  7. Investing

    How Much Money Will It Take to Become President in 2016?

    Learn why the 2016 presidential election is likely to be the most expensive race ever, and estimate how much it is going to take the eventual winner to prevail.
  8. Stock Analysis

    Why Is GE Selling Some of Its Subsidiaries?

    Learn why GE is selling off a substantial amount so it does not have to comply with increased government regulation in the wake of the 2008 financial crisis.
  9. Investing

    Will Donald Trump Be Able to Fund His Entire Campaign?

    Discover why Donald Trump's extravagant wealth and vast net worth may still not be sufficient to self-finance a successful presidential campaign in 2016.
  10. Economics

    The 3 Top Things to Know About Donald Trump's Economic Views

    Learn how Donald Trump's economic views are big on confidence but short on specifics. Identify the candidate's top three areas of focus.
  1. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  2. Where are the Social Security administration headquarters?

    The U.S. Social Security Administration, or SSA, is headquartered in Woodlawn, Maryland, a suburb just outside of Baltimore. ... Read Full Answer >>
  3. Is the Social Security administration a government corporation?

    The U.S. Social Security Administration (SSA) is a government agency, not a government corporation. President Franklin Roosevelt ... Read Full Answer >>
  4. How does the role of Medicare/Medicaid affect the drugs sector in the U.S.?

    Medicare and Medicaid have enormous influence on the pharmaceutical, or drugs, sector in the United States. For instance, ... Read Full Answer >>
  5. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>
  6. What do I do if I think an accountant is in violation of the Generally Accepted Accounting ...

    The Financial Accounting Standards Board (FASB) promulgates generally accepted accounting principles (GAAP) in the United ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!