The signs are now unmistakeable: a second fiscal stimulus bill and the increase in the deficit and government borrowing that it will cause is now more likely than not.

This is a huge change from as recent as a week ago.  At that point the Bush position that the first stimulus should be allowed to go into effect before a second was enacted was commonly being accepted because a veto was considered to be certain.

But that was before the Bear Sterns deal was announced.

The mood in Congress changed almost immediately.  Bailing out a bank gave reprsentatives and senators permission to talk seriously about providing similar treatment for their constituents.  So all of a sudden, the homeowner bailout using taxpayer funds that wasn't happening seven days ago is now very much alive and well and living in Washington.

It may only be the first of January, but after more than a week out of the office and a very successful effort during that time to catch up on some sleep, the year ahead is starting to come into better much better focus as far as Washington and economic policy is concerned.

So what will Washington do between now and Election Day when it comes to the economy?  If we’re talking about the White House and Congress, the answer is “not much.”