It took only 13 words from Fed chief Ben Bernanke to signal that another shot in the arm for the faltering U.S. economy may be coming. As congressional Democrats push for a boost aimed at Main Street costing at least $150 billion, the public face of the nation's central bank recently threw his considerable weight behind a "significant" stimulus measure in typically understated fashion. "Consideration of a fiscal package by the Congress at this juncture," Bernanke said, "seems appropriate."
The Federal Reserve Bank chairman shied away from the "R" word—recession—but his grim outlook placed Congress front and center again as policymakers grapple with the kind of global financial tremors unknown since the Great Depression. The pressure is even greater as it becomes clear that bailout packages of more than $1 trillion for big banks and Wall Street giants have not worked overnight. Urgent calls for more spending are met by angry words about a runaway deficit, ballooning in part because of massive bills for ongoing wars in Iraq and Afghanistan.
Now, lawmakers are trying to assemble legislation to target billions of dollars at people who are hurting—those who "live on Main Street and all the side streets," as one Democrat put it—as well as states struggling with budget shortfalls. There's also talk about an infusion that would finance infrastructure projects, providing they could be launched fast enough for the big bucks they'd cost to have instant economic bang.
In the mail? But don't count on Uncle Sam mailing any more $600 tax rebate checks just yet. Rebates remain under discussion, but their likelihood seems iffy after studies showed that many of the people who got the checks beginning in April—thanks to a $168 billion stimulus package Congress approved in February—stashed the money in savings or tackled credit card debt. Those who hit the malls "spent money on products made in China," complain lawmakers, including Sen. Judd Gregg of New Hampshire, the top Republican on the Senate Budget Committee. Gregg expects to oppose a new stimulus out of concern over the exploding deficit, which just hit a record $455 billion. Democratic Senate Majority Leader Harry Reid advocates a stimulus, and Gregg, despite his reservations, expects Congress will pass one in a lame-duck session in mid-November.
The size of the package is fluid—somewhere in the range of $150 billion to upwards of $300 billion—but aides to Democratic House Speaker Nancy Pelosi, a leading proponent, are quick to say it most likely will be on the lower end. "The need for this package is undeniable," Pelosi argues, noting that nearly 800,000 jobs have been lost this year, with 159,000 in September alone.
For Pelosi to succeed at what she's ceased calling a stimulus—an "economic recovery package" is her preferred language—she'll have to stare down deficit hawks, some in her own party, and take on Republicans who bristle at the prospect of a spending bonanza. Instead, they prefer tax cuts and other incentives to spur business and investment. GOP Minority Leader John Boehner has dismissed the effort as "pork-barrel spending masquerading as stimulus." Others caution that extending unemployment benefits gives people a reason not to look for work and that bailing out foundering states rewards those that made bad choices.
For months, Pelosi and her allies have pushed for a second stimulus following the $168 billion approved in February—not coincidentally, after Bernankesignaled his support. More recently, the House approved a $61 billion stimulus in late September, but the package went nowhere when a similar measure sank in the Senate in the face of GOP opposition and a potential White House veto.
Building bridges. Pelosi continued to stand her ground, even as members of Congress hurried home to campaign. She has been arguing for money to build roads, bridges, and highways; for preventing cuts at the state level in healthcare, education, and public safety; for extending unemployment checks; and for helping families with rising grocery bills. As has been her custom, she summoned prominent economists to the Capitol, this time on Columbus Day, a federal holiday. Pelosi later ordered key committee chairmen to hold a series of hearings—even though Congress technically has adjourned—on the size and composition of a stimulus. Within a week, Bernanke was on board, advocating "short term" fiscal measures.