WASHINGTON — President Bush and Federal Reserve Chairman Ben Bernanke on Thursday embraced calls for an economic stimulus package to avert recession. Bernanke said such a plan should be aimed at quickly getting cash into the hands of people, especially those with low and moderate incomes.
The Fed chief, in testimony to the House Budget Committee, said efforts that involve “putting money into the hands of households and firms that would spend it in the near term” would be more effective than other provisions, such as making Bush’s tax cut permanent. “Again, I’m not taking a view one way or the other on the desirability of those long-term tax cuts being made permanent,” he said.
While shying away from endorsing a specific plan, Bernanke made clear his support for the concept of an economic rescue package and that it be temporary, so that it won’t complicate longer-term challenges. It is likely that any such package would include tax rebates.
“Fiscal action could be helpful in principle” and may provide “broader support for the economy” than the Fed can furnish alone through reductions in interest rates, Bernanke said. However, “the design and implementation of the fiscal program are critically important,” he said.
Bernanke forecast slower growth in 2008 but not a recession.
When asked by lawmakers about the potential effect of a fiscal stimulus package totaling around $100 billion, Bernanke said that the economic impact could be “significant” and not “window dressing.” Some have floated packages that would range in size from $50 billion to billion to $150 billion — all of which are in the range of “reasonable,” Bernanke said.
Rebates can be useful, he added. “Getting money to low and moderate income people is good in the sense of getting a bang for the buck” because they tend to spend it quickly, Bernanke said. Research shows that the affluent spend some of their rebates, he said.
Temporary expensing and depreciation provisions for businesses also could spur spending, which would help the economy, he said. As it puts together a package, Bernanke added, “Congress might want to consider a diversified mix of elements.”
But he warned: “I hope Congress can resist having a huge list of things” that would lard up legislation and may not do much to help bolster the economy in the short run.
At the White House, spokesman Tony Fratto said, “The president does believe that over the short term, that to deal with this softening in the economy, that some boost is necessary.” That marked the first White House confirmation that Bush, confronting a deepening economic crises that has shaken much of the nation, supports government intervention. Until now, the White House said the president was just considering some type of short-term boost.
“We do want to try to pass something quickly,” Fratto said later in the day. “I see no obstacle to that. It seems to me that both sides of the aisle in both houses of Congress want to try to get to an agreement,” he said.
Fratto would not divulge the details or what the stimulus would look like, other than to say all options are being considered.
The shaping of a stimulus package was expected to accelerate Thursday during a conference call between Bush and congressional leaders. “I would characterize it as a consultation,” Fratto said.
House Speaker Nancy Pelosi, D-Calif., who was expected to be on the conference call, said Thursday: “We have to spend the money, invest the resources, give the tax relief in a way that again injects demand into the economy, puts it in the hands of those who need it most and into the middle class … so that we can create jobs.”
On Wednesday, Pelosi and Republican leader John Boehner of Ohio promised to craft legislation to energize the weakening economy.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
