The most telling thing about the recent calls for a second stimulus package in the US is that the bond market has looked the other way. Yields on 10-year notes, for example, continue to tick steadily lower, as they have since mid-June. What a far cry from the hoo-haa a few months ago over the US's deteriorating fiscal position and worries about runaway inflation.
Bond investors, therefore, either believe there is no chance of a second bill getting through Congress or, if one does, that a bulging fiscal deficit is now secondary to the likelihood that the economy will stay soggy for years and deflation might set in. Democrats themselves are divided over another package, while Republicans have jumped on the 467,000 jobs lost in June as proof that not even the first spending spree was justified.
Is more stimulus needed? There is no clear answer. For one, there is little consensus among economists whether deficit spending even works. A related headache is proving the counterfactual: for example, nobody knows what last quarter's growth would have been without the $200bn-odd of the $787bn stimulus so far committed. And if you do want to spend more, how much is enough? The first bill is equivalent to 6 per cent of 2008 output, according to the International Monetary Fund, far higher than the G20 average of 1.4 per cent. The next biggest package is China's at 4.8 per cent of last year's output. Some economists reckon the US should at least double its efforts.