Democrats Seek 2nd Round of Stimulus

House Speaker Nancy Pelosi argues that a new round is needed.
House Speaker Nancy Pelosi argues that a new round is needed. (Keith Bedford - Bloomberg News)

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By Lori Montgomery
Washington Post Staff Writer
Saturday, September 6, 2008

Congressional Democrats reacted to yesterday's grim unemployment news by renewing calls for a second round of federal spending to stimulate the economy. But President Bush remains opposed to the idea, and political analysts give it little chance of passage.

Nonetheless, Democratic leaders plan to forge ahead with a $50 billion stimulus package when Congress returns to work on Monday that would offer new money for highway projects, provide aid to cash-strapped state governments -- and help keep attention focused on the nation's flagging economy as voters prepare to go to the polls in November.

"With the unemployment rate at a five-year high, it is clear that we must take immediate action to strengthen our economy," House Speaker Nancy Pelosi (D-Calif.) said in a statement yesterday after the Labor Department reported that unemployment had soared to 6.1 percent in August. Congress "will soon act on a second economic stimulus package and a comprehensive energy plan that will create new American jobs."

Congressional aides said the package is unlikely to contain further tax rebates, as Sen. Barack Obama (Ill.), the Democratic presidential nominee, has suggested, because rebates would make the package too expensive. However, lawmakers are discussing whether to include funding for government loans to help the Big Three automakers retool plants and build smaller, more fuel-efficient cars. The car companies are seeking $50 billion in loans, which would cost the government about $7 billion in reserves against losses.

White House press secretary Dana Perino said that while the new unemployment numbers were "absolutely unwelcome," the Bush administration remains opposed to a second round of stimulus. Earlier this year, administration officials worked with both parties in Congress to approve a $168 billion stimulus package that included tax rebates for millions of families.

The first "economic stimulus plan is continuing to have the effects that we wanted it to have," Perino told reporters. Despite the rise in unemployment for an eighth consecutive month, Perino said, other economic measures, including overall growth, have been positive.

"Our economy is quite resilient, even in spite of the high energy prices and the housing crunch and the credit market issues," she said.

Republicans in Congress have generally taken the same line, as has the GOP presidential nominee, Sen. John McCain (R-Ariz.). Obama, meanwhile, has called for more tax rebates to help offset rising energy costs, as well as money for state and local governments to fund infrastructure projects and cope with rising health-care spending.

House Democrats plan to flesh out that idea in coming weeks. In addition to money for infrastructure and state aid -- both of which can help create or preserve jobs, economists said -- the package is likely to include a temporary increase in food stamps and more help for low-income seniors struggling to pay utility bills. Another extension of unemployment benefits is also under consideration.

Jim Horney, a budget expert at the Center on Budget and Policy Priorities, said such a package is likely to pass the House, where it could gain the support of some Republicans facing reelection. But in the Senate, he said, "I would think it's going to be very hard to actually do anything."

A top Democratic aide in the Senate agreed: "It's going to be an uphill battle."

With troubles in the labor market deepening, many economists say the economy would benefit from another injection of government spending. "There's a reasonably good chance that we might need another stimulus," said Mark Zandi, chief economist at Moody's Economy.com and a McCain adviser. But given the political climate, Zandi said, "I think it's a decision for the next president and Congress to make early in the next presidency."

Staff writer Dan Eggen contributed to this report.


© 2008 The Washington Post Company

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