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EXCLUSIVE: How Close Is White House To Second Stimulus?

Friday, 10 Jul 2009 | 6:34 PM ET

For weeks lawmakers have been hurling accusations at one another over who’s to blame for the blossoming unemployment rate and what’s the best path to get the economy back on track.

But the mud slinging really reached fever pitch on July 7th after published reports quoted Laura D’Andrea Tyson, a member of President Obama’s team, as saying the US should seriously consider a second round of fiscal stimulus.

Those comments generated a hailstorm of criticism -- so much so that before drawing a conclusion either way, we wanted to speak with Tyson ourselves and better understand what she’s proposing.

The Obama Trade: 2nd Stimulus?
Discussing whether the Obama administration underestimated how bad the economy is, with Laura Tyson, Haas School of Business and the Fast Money team.

Don’t forget that Tyson is one of world’s most esteemed economists not to mention dean of the Haas School of Business at University of California. Her insights are often extremely keen which she demonstrated once again during our exclusive interview.

“I want to set the record straight,” Tyson told us right out of the gate. “(Although) the economy is in recession the recession is moderating. We have only spent one quarter of the original package… and it’s having an effect as predicted. It’s on track.”

And the impact was always intended “to make a bad situation less bad,” she said. In other words slow the decline in unemployment, GDP etc. But not go from a sharp decline to robust growth in a quarter or two.

And to that end it appears the economy may be stabilizing, at least for now. Over the past week we've seen the number of layoffs decline and Alcoa report better than expected earnings. “It’s sort of like helping a patient recover,” she added. And now “we have to monitor the vital signs.”

So what does that mean for a second stimulus?

Tyson said, “I think it’s premature to plan for a second stimulus.” Although she would not say when her thinking may change, she did give the impression that circumstances would have to take a sharp turn for the worse. In other words, Tyson would only advocate a second stimulus as a measure of last resort; kind of like pulling out the big gun when all else fails.

But she also left us believing it wasn't entirely out of the question either. "In a highly uncertain situation we need to monitor the vital signs (of the economy) and then make a decision whether something more is warranted, and that decision wouldn't be for several months," she said.

So why all the talk of a second stimulus earlier in the week? Tyson tells us those quotes you read were her comments on scenario planning.

So what’s the bottom line? You probably shouldn’t lose sleep over the prospect of a second stimulus. It doesn't seem likely at least not for a while.



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