Federal Reserve Chairman Ben Bernankes endorsement Monday of a second economic stimulus package had Republicans playing defense on the issue two weeks before the Nov. 4 elections.
With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate, Bernanke said in remarks prepared for his appearance before the House Budget Committee.
Bernanke did not suggest a particular size for the package but said Congress should first consider including measures to help improve access to credit by consumers, homebuyers, businesses and other borrowers.
Democratic leaders have advocated a second stimulus package; the House passed a $61 billion spending package before adjourning, but it met its demise in the Senate. Democrats reacted to Bernankes statement as affirmation and urged Republicans to jump on board.
At a time when Americans are struggling with rising costs and weakened retirement security, and a growing number of workers are losing their jobs, I call on President Bush and Congressional Republicans to once again heed Chairman Bernankes advice and as they did in January, work with Democrats in Congress to enact a targeted, timely, and fiscally responsible economic recovery and job creation package, Speaker Nancy Pelosi (D-Calif.) said in a statement.
But the Bush administration reacted coolly to Bernanke, and Republican leaders continued to criticize the Democratic plans as wasteful.
House Minority Leader John Boehner (R-Ohio) outlined a list of stimulus proposals of his own last week, including deep cuts in capital gains and corporate taxes alongside energy proposals that the GOP has supported.
House Republicans agree with Chairman Bernanke that action to strengthen our economy is needed, and it should come in the form of pro-growth policies that create new jobs, lower energy costs and protect taxpayers not hundreds of billions in new government spending masquerading as economic stimulus, Boehner said.
Boehner focused Monday not on Bernankes endorsement of another package but on a statement by Bernanke opposing any net increase in taxes during the downturn.
Boehner is in a difficult position, given that most of his Conference voted twice against the $700 billion Wall Street bailout package that Bernanke and the White House argued was critical.
But a House GOP leadership aide signaled that Republicans are willing to sit down with Democrats to craft a compromise package.
The question is if Democrats are going to work with Republicans on a responsible package that will include some of our ideas that will genuinely help the economy. … If its just spend, spend, spend, then I dont imagine it gets any Republican support at all, the aide said.
Rep. Paul Ryan (R-Wis.), the ranking member on the Budget Committee, cautioned that another stimulus package could be counterproductive by adding to an already burgeoning deficit, warning that it could reach $1 trillion next year.
We have seen time and time again that these temporary fiscal spending packages simply provide one or two quarters of pop before the economy simply reverts back to its pre-stimulus trend, he said. If Congress is going to take action, it should be through fast-acting tax policy that boosts incentive to invest and create jobs.
Senate Budget ranking member Judd Gregg (R-N.H.) said Senate Republicans would not be rushed into swallowing the Democratic proposal that would aggravate the federal deficit.
We should be careful not to throw a lot of money out the window, Gregg said. Im unsure if the stimulus would do anything except to benefit the Chinese economy.
Gregg said there might be a need to do something that would boost the economy, but it should be a targeted plan dealing with real estate securities and increasing savings, something he said is absent from the Democratic proposal.
The White House, meanwhile, didnt budge.
He expressed his position, Bush spokesman Tony Fratto said of Bernanke. That doesnt change our view that so far, what the Democrats are proposing would not stimulate the economy anytime soon. They keep going on about a stimulus plan but there does not seem to be stimulus in it.
Democratic aides argued that their proposals for infrastructure spending, unemployment insurance and food stamp benefits would quickly inject cash into the economy and create hundreds of thousands of jobs.
Fratto left open the possibility that the administration will consider proposing another package after the election. The bottom line is Congress wouldnt be back to consider it for a month. … For now our focus is on unfreezing the credit markets, and thats the best thing we can do for the economy right now.