After years in which budget politics made it hard for Democrats to push big spending packages through Congress, liberals are seizing this opportunity to press for some of their priorities. The Economic Policy Institute, a liberal research organization, today proposed $100 billion of new spending over the next year as part of a two-year, $300 billion stimulus package.
Economists said higher levels of government spending did give the economy a boost. But the degree of that boost depends in part on where the money goes and how quickly it gets from the government's books into the real economy. And if a spending spree led to budget deficits, it could push up long-term interest rates, offsetting all or much of the positive impact of the spending.
One spending proposal that seems likely to pass is an expansion or extension of the unemployment insurance program. The Senate is considering a bill that would extend, by a year, the current 26- week limit on benefits.