House Democrats Consider Large, New Economic Stimulus Package
Tuesday, October 14, 2008
With fears rising that the nation stands on the precipice of a prolonged recession, House Democrats are contemplating a huge infusion of public cash -- as much as $300 billion -- to stoke economic growth by creating public jobs and padding the wallets of struggling consumers.
A spending package of that magnitude would be far larger than anything Congress has previously considered and would be nearly twice as big as the stimulus measure President Bush signed in February. At a two-hour "economic summit" hosted yesterday by House Speaker Nancy Pelosi (D-Calif.), an array of influential economists told lawmakers that a truly massive spending package is needed to forestall economic disaster.
"There was a good deal of sentiment among economists for something really big," said Brookings Institution economist Alice M. Rivlin, a former member of the Federal Reserve Board who attended the meeting. "People are really worried that we could be slipping into a deep recession."
Pelosi said lawmakers will hold public hearings on a variety of spending proposals over the next few weeks and assemble a package that could be put to a vote soon after the Nov. 4 election. That package is likely to include many of same provisions that comprised a $61 billion stimulus measure that last month passed the House but died in the Senate, including new money for roads and bridges, aid to cash-strapped state governments and extra funds for food stamps and unemployment insurance.
The new package "may have to be larger. . . in light of the events that have transpired since we had our legislative action on the floor," Pelosi said. She declined to say how much larger, but Democratic aides confirmed that $300 billion is probably the upper limit. They said a package of that size would have to include some form of general tax rebate, which enjoys only lukewarm support among some key Democrats.
Whatever the size of the package, the cost is likely to be added directly to the budget deficit, which is already at record levels. But the spending could help prevent an even bigger loss in tax revenues by spurring economic activity.
A House Republican aide quickly dismissed a $300 billion stimulus package as "even more irresponsible and ridiculous" than the smaller packages Democrats have previously discussed. Republicans are particularly resistant to spending federal money on "a huge public works plan" or "bailing out states who spent a lot more money than they should have," House Minority Whip Roy Blunt (R-Mo.) said Sunday on ABC News's "This Week."
In a letter yesterday to Pelosi, House Minority Leader John A. Boehner (R-Ohio) laid out an alternative plan for stimulating the economy that includes cutting taxes on corporations and capital gains, as well as some new provisions that Democrats said could form the basis of a compromise. Boehner's tone, however, was far from conciliatory.
"Nothing currently being discussed by the Majority as 'stimulus' will stabilize the economy long-term," Boehner wrote. "Our constituents are not looking at the mess in Washington or Wall Street and asking the federal government to take care of other governments. They are not asking for . . . pork-barrel spending masquerading as 'stimulus.' "
The White House had threatened to veto previous Democratic stimulus packages, though the rhetoric has softened as the economy has worsened. In recent days, White House officials have declined to comment directly on the proposals, noting that a package could not be approved until lawmakers return to Washington Nov. 17.
Meanwhile, a growing number of economists are coming to the conclusion that Washington must do more to prop up the economy. By some projections, economic growth could stall or fall by as much as 2 percent through much of next year. Spending $300 billion -- about 2 percent of the gross domestic product -- could offset that loss.
"If the magnitude of the problem is in the 2 percent of GDP range, that doesn't mean you have to spend 2 percent. But it does focus the mind," said Jared Bernstein, a senior economist at the Economic Policy Institute who attended yesterday's meeting. "When we talked about the need for a recovery package of considerable magnitude, heads nodded."