Reprinted with permission of Stateline.org

Talk of another federal economic stimulus package is gaining momentum largely because federal officials are beginning to realize that state governments will be worse off next year compared to the first two years of the recession.

Just don't call it stimulus for now. The Obama administration and congressional Democrats are contemplating ways to extend additional federal aid to safety net programs such as unemployment and food stamp benefits, according to the New York Times. Obama aides told the newspaper such an action would be an expansion of the existing $787 billion stimulus, not a new job-creating program.

Federal officials say if the unemployment rate, currently 9.8 percent, keeps rising to 10 percent or higher, states could need help paying for additional jobless benefits and Medicaid, the federal-state program for low-income people. State officials say they already cut spending deeply and raised taxes and fees this year to balance budgets, even with federal stimulus aid. They will not have as much stimulus aid in 2010 as they did this year -- unless Congress and Obama send them more.

Proposing another stimulus is risky because polls show many Americans are nervous about adding to the $1.3 trillion federal budget deficit. It would be the third stimulus in three years, counting President Bush's tax rebate in 2008. This is why Obama aides are downplaying another stimulus. No matter what they call it, extending aid to safety net programs stimulates the economy because that money gets spent quickly and entirely by the recipients.


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Stephen C. Fehr  |  Stateline.org Staff Writer