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The Big Caveat from L'Aquila


Today's headline in the Wall Street Journal read as follows:

"White House: No Differences Among G-8 Over Stimulus Exit Strategies"

Bloomberg's was strinkingly different:

"G-8 Spars Over Stimulus, Leaves Exit Strategies Open"

Whether the Group of Eight (U.S., Germany, Britain, France, Italy, Russia, Japan and Canada) came to any sort of compromise of conditions regarding exit strategies for their respective domestic economic stimulus packages is rather dubious. In fact, for the U.S., it might be completely irrelevant. Why? All signs point to another stimulus.

Despite some recent green shoots that suggest the U.S. economy has bottomed out, there won't be a real recovery until jobs start rising. Real economic growth requires real jobs--a 9.5% unemployment figure that continues to rise won't cut it. And the spending spree--the Fed has already pumped over $1 trillion into the economy since last summer--has not worked. On the whole the package has been stimu-less.

But recently, two key figures to (economist Paul Krugman) and of (Vice President Joe Biden) the administration might have tipped their hat. Krugman, whose on-again, off-again relationship with the administration is relegated to the sidelines for now, is calling for round two of stimulus dough. Biden, who has in consecutive months come out looking rather helpless, did not rule out the possibility.

Mr. Obama's most recent remarks regarding any more stimulus were, like the vice president's, guarded:

"I think its important to see how the economy evolves and how effective the first stimulus is."

And that spending more borrowed money is:

"potentially counterproductive."

Fair enough. Keeps both sides at bay. The president gets an A in politicizing, an F in economics.

But the biggest caveat in all this talk about exit strategies or double whammys is Obama's abdication. America is supposed to be the beacon of free market principles. Instead the throne has been passed to German Chancellor Angela Merkel who stated on Wednesday,

"We have to get back on course with a sustainable budget."

The German Chancellor has been a budgetary fiscal stalwart of recent, exposing the dangers of high inflation and ignoring deficit reductions. It's time the U.S., sad to say, follows Germany's lead.