No party favors

US stimulus: It’s an unhappy anniversary for the U.S. stimulus program. President Barack Obama's year-old, $787 billion attempt to jump-start the economy promised more than it delivered. Unemployment remains stubbornly high and the public is losing faith in the rest of his ambitious policy agenda. But there may yet be time to plan a bigger celebration next year.

Some are still finding reason for muted cheers now. Using traditional Keynesian modeling favored by Wall Street and Washington, the plan has created both GDP growth and jobs. But it is an old-fashioned way of analysis. So-called New Keynesian models, which assume households and businesses alter their economic behavior today based on future expectations of government tax or spending policy, find a far smaller or even negative impact.

The wisdom of this approach is borne out, for instance, by businesses big and small. They're largely frozen by concerns about the impact of growing deficits, as well as shifting policy. The stimulus already costs $75 billion more than first expected. That may explain why more Americans are becoming New Keynesians. A recent CNN poll found 56 percent opposed to the stimulus, with only a quarter believing it has helped the middle class. It's true the economy was worse than almost everyone expected. But Team Obama's original forecasts were well wide of the mark. It predicted the stimulus plan would prevent mass unemployment -- and keep the level from reaching 8 percent. It's now at 9.7 percent and even government forecasts see a bounce back up to double digits.

The White House isn't conceding it should have allocated the stimulus money differently, or even doled out more of it. Still, with 60 percent of the funds unspent, there remains a chance at salvaging the plan, and some of Obama's supporters.

Temporarily cutting the payroll tax for employers and workers, and permanently lowering the U.S. corporate tax to at least the OECD average would be a good start. Smarter stimulus also would devote more capital to a greater number of sensible infrastructure projects. A merrier second anniversary is possible, but don't plan the party just yet.