The passage of an unemployment insurance extension, which occurred at the end of November, is likely the last effort by the 110th Congress to enact legislation to stimulate the economy. With Republicans continuing to block immediate passage of a large economic stimulus package, Democrats are preparing to move legislation as soon as President-elect Barack Obama takes office in January 2009. Although Senate Republicans and President Bush have vowed to continue to block enactment of broad economic stimulus spending, congressional Democrats mustered sufficient support to pass a seven-week extension to unemployment insurance benefits. The extension gives extra benefits to those who exhaust their 26 weeks of state benefits. In states with unemployment rates higher than six percent, the $6.1 billion bill will provide 13 additional weeks of jobless benefits. Approved by wide majorities in both chambers and promptly signed by President Bush, the bill is the current limit of bipartisan support for economic stimulus policy.

When the House passed a $61 billion economic stimulus package (H.R. 7110) in September, House Minority John Boehner (R-OH) called the measure a "monstrosity," and President Bush issued a veto threat, stating that the bill would "simply increase government spending including self-perpetuating entitlement spending by tens of billions of dollars," ultimately leading to "record tax increases or higher deficits [that] will not advance our economic recovery." On the other side of the Capitol, Senate Republicans blocked (52-42) that chamber's companion legislation (S. 3604), while Ranking Member of the Senate Appropriations Committee Thad Cochran (R-MS) chided Democrats for bringing up a bill that was "designed to fail." Because of these setbacks, congressional Democrats are focusing their efforts on the start of the 111th Congress, when the ability of a shrinking minority of Republicans to block stimulus spending will be considerably weakened.

As the clock winds down on the current Congress and the Bush administration, Democratic congressional leaders and President-elect Obama have signaled that a stimulus measure in the range of hundreds of billions of dollars will be at the top of the legislative agenda in January 2009. Citing a yet-to-be-defined plan to create 2.5 million jobs by 2011 and a stimulus package that would be "significant enough that it really gives a jolt to the economy," Obama has made clear his intention to push for far-reaching and costly stimulus legislation. Although he has resisted attaching a specific dollar amount to his plan, his economic advisors and outside economists have indicated that a two-year spending package totaling $500-700 billion will be necessary to provide the economic jump-start that Obama seeks.

Even some foes of using direct government spending to stimulate the economy are giving their tacit approval. Harvard economics professor Martin Feldstein, a former economic adviser to President Reagan and presidential candidate Sen. John McCain (R-AZ), has said, "I hate to say it, because I'm a guy who doesn't like government spending and doesn't like fiscal deficits, but I don't see any alternative."

While Democratic congressional leaders and Obama have continued to be vague about the specific size and composition of a potential stimulus bill, a proposal will most likely be composed of Food Stamps, Medicaid funding boosts, and infrastructure spending that Obama has called the "long-term investments in our economic future that have been ignored for far too long." These spending priorities have become increasingly pressing as the national economic downturn is straining state and family budgets.

Twenty-seven states are currently facing $26 billion in combined budget shortfalls that will only continue to increase as property tax revenues collapse and as the newly unemployed begin applying for assistance programs like Medicaid. The Kaiser Family Foundation notes that a one percent increase in the unemployment rate increases enrollment in Medicaid and the State Children's Health Insurance Program (SCHIP) by one million. Proposals to boost federal matching funds for Medicaid would reduce pressure on state governments to cut spending on other support programs, raise state college tuition, or increase taxes on working families. In addition, an injection of federal funds into state and local infrastructure projects will allow states to continue funding vital public services by freeing resources and mitigating job losses that ultimately reduce state revenues.

Critics of infrastructure-spending-as-stimulus, however, say that while such projects may have their own merits, as economic stimulus, they would provide little short-term relief. However, according to the American Association of State Highway and Transportation Officials, there are $32 billion in infrastructure projects that are "ready to go," with more on the way. "Short term" is also relative. Nobel laureate and Princeton University economics professor Paul Krugman predicts that the current economic slump will last a number of months — long enough that spending on infrastructure would prove to be effective economic stimulus.

House members and senators have been instructed to begin crafting legislation in January 2009, an oddity immediately following presidential election years, which usually see Congress returning to work after the inauguration in late January. The move will allow President-elect Obama to sign a stimulus package into law in the first hours of his presidency. If the size and scope of the legislation match the seriousness and urgency with which Obama is approaching the economy, Congress could be poised to pass a spending bill of unprecedented proportion, greatly mitigating the hardships of millions of families while jumpstarting an effort to rebuild the nation's crumbling infrastructure.