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Home arrow Leading The News arrow Clouds clear on stimulus package
Leading The News PDF Print E-mail
Clouds clear on stimulus package
Posted: 01/18/08 12:01 AM [ET]

Congress brimmed with bipartisanship Thursday as momentum came together for a legislative stimulus package.

Democratic leaders have clashed furiously with President Bush since taking the majority a year ago, but on Thursday they reported sunny optimism following an afternoon conference call with the president. Bush had publicly signaled his support for a stimulus through a spokesman earlier in the day, and is to outline his plans for a stimulus Friday.

The stars continued to align with the encouragement of Federal Reserve Chairman Ben Bernanke.

House Speaker Nancy Pelosi (D-Calif.) said she expects to have a proposal in two weeks and a bill to sign in a month.

“There is every reason to believe we can get this job done,” Pelosi said at a news conference.

There are no details of what will be in the package beyond the Democratic refrain of “timely, targeted and temporary.” No numbers have been released either, but Pelosi said that the proposals discussed would probably average $100 billion.

House Minority Leader John Boehner (R-Ohio) joined in the bipartisanship, signaling that he doesn’t want to stand in the way of politically popular plans to stem the economic slowdown.

“It’s no secret that middle-class American families and small businesses have real concerns about the state of our economy and rising costs of living. Republicans want to continue to work with Democrats in a bipartisan fashion to address this challenge,” Boehner said.

Factions within both parties have complained about the package. Democratic Blue Dogs are worried about increasing the budget deficit, while conservative Republicans want the stimulus to make permanent Bush’s tax cuts.

But those factions have more leverage when Democratic leaders are up against a united Republican front and are scraping for votes, not when the two parties’ leadership are cooperating.

Bernanke on Thursday also dealt a setback to Republicans who want to extend Bush’s tax cuts — which are set to expire at the end of 2010. He said that would “have some long-term effect” but wouldn’t be the best way to revive the economy.

“Just for the next few months, the evidence suggests that putting money into the hands of households and firms that will spend it right away would be more effective,” he said.

On the other hand, Bernanke seemed to bolster Republican arguments that business tax relief should be a part of any package, saying that the business tax cuts of 2003 “did help stimulate the economy.”

Speaking at a House Budget Committee hearing, Bernanke said he felt the economy would likely avoid recession, but added that fiscal stimulus would help to bolster growth as long as it meets certain criteria and is enacted quickly. “In order for this to be effective, we need to move very quickly,” he said.

But he warned that a stimulus package could be harmful if it increased the long-term deficit.

The Fed Chairman rebuffed lawmakers’ pleas for particular solutions. But he said targeting the bottom half of the income scale could be more potent. That boosted Democrats who have argued for rebates and unemployment insurance spending over tax cuts that help higher earners.

“I think there’s good evidence that cash that goes to low-income and middle-income people tends to be spent more quickly,” he said.

Though he cautioned lawmakers on creating too costly a package for fear of harming the fiscal outlook, Bernanke rejected the idea of attaching offsets to “pay for” a stimulus, saying, “It would be counterproductive to increase taxes as part of this program.”

A White House spokesman, Tony Fratto, on Thursday gave the impression that President Bush — who had yet to say whether he believes fiscal stimulus is needed to jump-start the economy — has swung in favor of the idea. “We do want to try to pass something quickly,” he said.

Fratto declined to give any details, but said Bush “wants to listen” to members of Congress at next week’s meeting.

He said that the administration is “absolutely committed to” making the tax cuts permanent, but remained vague on whether Bush would insist on that as part of any stimulus package.

“Whether it’s part of a specific plan or not, we’ll have to see, but it’s certainly a goal that we want to accomplish and to be — and to put this economy in the best position going forward,” Fratto said.

But amid the bipartisan glow that comes with the expectation of passing a popular bill, there were sharp voices of doubt.

Former Ways and Means Committee Chairman Bill Thomas (R-Calif.) said he was skeptical over whether Congress could enact a fiscal stimulus package that would have the short-term effect lawmakers wanted.

He said the congressional debate has been “a political discussion with a little bit of economics, when a larger dose of economics is needed.”

“This is a $14 trillion economy,” Thomas said. “We’ve weathered natural disasters and man-made disasters before.”

Walter Alarkon contributed to this article.

 
 
 
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