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The Obama RecessionWhen do we stop blaming Bush for the bad economy?

By Christopher BeamUpdated Thursday, Oct. 8, 2009, at 6:46 PM ET

Barack Obama. Barack ObamaAs job losses climb, President Obama faces two related questions. The first is more like a riddle: How do you pass a new round of stimulus measures without tacitly admitting that the first round didn't work? (Answer: Don't call it a stimulus.) The second is harder: When does the economy become his own instead of his predecessor's? (Answer: sooner than he'd probably like.)

It was only July when White House aides said it was premature to discuss a second round of measures to boost the economy. But now, with unemployment pushing 10 percent in September and projections that it will go even higher in 2010, Obama and the Democratic leadership are exploring new ways to reduce the pain.

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What to do? The low-hanging fruit would be simply to extend provisions already included in the original stimulus package. For example, continuing the unemployment benefits that are set to expire in November—a "no-brainer," says Dean Baker of the Center for Economic and Policy Research, since people with low income tend to spend their extra cash—and make sure laid-off workers keep getting health insurance. Extending these policies should be easy politically as well, since they can be billed as social safety measures rather than stimulus. (Democratic leaders today introduced a bill that would extend unemployment benefits another 14 weeks.)

Trickier would be passing a new batch of policies that weren't part of the original deal. The proposal that has gotten the most traction this week is a tax credit for businesses that hire new employees. The logic is simple enough: Reward companies that create jobs. The problem is implementation. The government could simply give every employer a payroll tax credit and hope it hires new workers. While that would be a windfall for companies, they might not use the money to expand payroll. "You wouldn't get a big bang for the buck," says Ted Gayer of the Brookings Institution.

Another option would be to give companies the bonuses only after they hire new workers. But that arrangement would be vulnerable to manipulation, says Gayer, since companies could twist the definition of "new" worker. Other ideas that haven't quite made it onto the president's desk: re-upping on the stimulus money given directly to states; paying employers to lower the number of work hours so they can hire new workers, per Dean Baker; and boosting small-business loans, as proposed by Mark Zandi of Moody'sEconomy.com.

These proposals face the same questions as the original stimulus: How many jobs would they create and at what cost? The question is moot for policies like unemployment insurance, which isn't supposed to create new jobs. Two economists estimate that the employer tax credit, however, would cost $20,000 for each job created. Now compare that with the original stimulus package: The administration originally promised that it would save or create 3.5 million jobs. (So far, the administration says, the stimulus package has saved or created about 1 million.) At $757 billion, that's about $216,000 per job. Of course, money from the stimulus package was used for other things as well. But, politically, that was the tradeoff. With that precedent, $20,000 per job may be an easy sell.

Even Rep. Eric Cantor of Virginia, the Republican whip, doesn't seem opposed. "There is a lot of traction for this kind of idea," he told the New York Times. "If the White House will take the lead on this, I'm fairly positive it would be welcomed in a bipartisan fashion."

But taking strong action on the economy comes with political risks. For one thing, a second round of stimulus implies that the first round didn't work—a claim made by economists from across the political spectrum. "They put forth a package that by their own numbers wasn't going to be able to fully deal with the problem," says Baker. (Council of Economic Advisers Chairwoman Christina Romer thought the bill should have been $1.2 trillion, not $800 billion.) Republicans, meanwhile, point to the 8 million (and climbing) jobs lost since December 2007 as evidence that the president's plan isn't working.

And that's just Obama's point: Since 2007. When he wasn't in office. Obama has often bemoaned the fact that he inherited "a trillion-dollar deficit, a financial crisis, and a costly recession." Discussing the economy last week, Vice President Joe Biden said the administration "inherited an awful lot of baggage."

But at some point, Bush's economy will become Obama's economy. And the more the Obama administration tinkers, the nearer that moment draws. Hence the urge to play down a second round of stimuluslike measures.