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Read My Lips: No New Stimulus


The first package has yet to be spent.

If you've ever wondered why President Obama seems to spend so much time in the media, perhaps it has something to do with the politics of distraction.

To understand what this means, let's begin with Vice President Joe Biden.

No doubt you've noticed that Mr. Biden has been wondering aloud (he does that a lot) whether a second stimulus package will be needed.

Given the economic data, especially the employment data, it's understandable why there might be a certain anxiety regarding the impact of the first stimulus package -- at least among those unwilling to probe a little deeper. Upon further inspection, you find that much of the first stimulus package -- as disjointed as it may be -- remains unspent.

In light of the rising unemployment data, and given how sensitive politicians are to the feelings of their constituents (employed and unemployed), one has to ask why that might be.

The standard answer is that much of the spending targeted for infrastructure projects isn't "shovel-ready." Such projects, we're told, will be shovel-ready in 2010. Now, let's put on our thinking caps and -- at the risk of sounding more cynical than skeptical -- look at this a little more critically.

Earlier this year, a bill providing for massive sums of money to be spent on infrastructure projects was ratified. Interestingly, much of it won't be spent until next year.

Our lawmakers know that there are virtually no meaningful elections being held this year. Whereas 2010 is the second-most-important election year in the 4-year national election cycle. So virtually no stimulus money is being spent this year; the lion's share will be spent next year -- just in time for the all-important 2010 Congressional elections.

If you're with me thus far, then let's take it one final step further.

There's an adage in sales: "If you can't sell the numbers, sell the story." With the general economic data improving but still quite dismal, the numbers -- especially employment numbers -- are nothing anyone would brag about. So, what's a crafty politician to do? How about take to the airwaves and sell the story over, and over, and over again?

Investment Strategy Implications

The far more important investment story today is the earnings reports for the second quarter. However, investors are well served if they appreciate the political dimensions of economic public policy.

As in a magic act, the politics of distraction is all about misdirection. That's risky, but reasonable -- at least from a political perspective.

The bottom line is: No second fiscal stimulus package is wanted or needed.
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