U.S. stimulus debate has Democrats scrambling

WASHINGTON (Reuters) - President Barack Obama and his Democrats are scrambling to fend off Republican criticism that a $787 billion economic stimulus is not working and talk is turning to a politically risky second spending plan.

Almost five months after Democrats used their majorities in the U.S. Congress to push through the stimulus, the two-year package has had little impact as anxious Americans watch the country's unemployment rate surge to 9.5 percent.

Obama is asking for patience and not ruled out a second spending plan to try to boost the economy out of recession.

"He's not ruling anything out, but at the same time he's not ruling anything in," White House spokesman Robert Gibbs said. "Obviously we passed a hefty recovery plan that implements over the course of about a two-year period of time, and we're on track with that implementation."

The White House argues the jobless picture would be worse without a stimulus. The argument is difficult to make, said Kathleen Hall Jamieson, director of the Annenberg Public Policy Center at the University of Pennsylvania.

"The problem is arguing that something would've been worse had we not done what we did," she said. "And the second problem they have is the projections they gave originally turned out to be faulty."

HIGHER UNEMPLOYMENT

The White House had expected the U.S. unemployment rate to peak at 8.0 percent when it worked with Congress to push through the $787 billion plan.

Vice President Joe Biden told ABC's "This Week" that the Obama team had "misread" how bad the economy was when it took office. Obama, in a subsequent NBC News interview, corrected him, saying "rather than saying 'misread,' we had incomplete information."

Billionaire investor Warren Buffett, who backed Obama's election last year, said in an interview broadcast on ABC's "Good Morning America" on Thursday that unemployment could hit 11 percent and a second stimulus package might be needed.

Republicans hoping to cut into the Democrats' majorities in 2010 congressional elections are eager to declare the stimulus a failure that has driven up the country's debt and are gearing up for a fight against a second stimulus.

Senate Republican leader Mitch McConnell of Kentucky said talk of a second spending plan is "mind-boggling."

"Down home, we used to say there's no education in the second kick of a mule," he said.

John Boehner of Ohio, the top Republican in the House of Representatives, produced a video ad showing a bloodhound named Ellie Mae searching for stimulus jobs. Democrats quickly accused him of making misleading attacks.

Democrats disagree over how to proceed. Senate Majority Leader Harry Reid of Nevada, who faces a potentially tough re-election fight in 2010, said this week there was no evidence that a second stimulus was needed -- that the first package simply needed time to work.

MORE SPENDING TO COME

Economist Bill Galston of the Brookings Institution said it appeared that only about $100 billion of the $787 billion has been spent so far, and that the pace of spending will increase rapidly in the next six to nine months.

"Up to now, the amount of money that has hit the economy has only been a dosage," he said. "I don't think it's done much of anything up until now because the numbers are so small, but they're about to get bigger."

Some congressional Democrats want to consider a second stimulus. House Majority Leader Steny Hoyer said: "We need to be open to whether we need additional action."

Norm Ornstein, a political expert at the American Enterprise Institute, said he doubted the political will existed to push ahead with a new stimulus amid "growing fear in both parties of out-of-control deficits down the road."

As Obama pushes for a deal with congressional Democrats to overhaul the U.S. healthcare system, Americans are expressing concern about his stewardship of the economy.

Last month a Washington Post-ABC News poll found that more Americans are having doubts about the stimulus, 52 percent saying the package had succeeded or will succeed, down from 59 percent two months earlier.

Biden, who has been given the task of promoting the stimulus, was headed on Thursday to Ohio, a swing state in elections and where Obama's personal standing with the public has taken a hit.

A Quinnipiac University poll this week said that in the past two months, Obama's job approval rating in Ohio -- considered a critical battleground state in presidential elections -- had fallen from 62 percent to 49 percent. Only 46 percent approved of his handling of the economy.

(Editing by Howard Goller)

(steve.a.holland@thomsonreuters.com)