Federal Reserve Chairman Ben Bernanke told Congress Monday a fresh round of government stimulus is a good idea because there's a risk the country's economic weakness could last for some time.
Congress should consider implementing a second economic stimulus package, Federal Reserve Chairman Ben S. Bernanke said today, advising that any such program should be designed to have immediate impact and promote access to credit.
Bernanke, testifying before the House Budget Committee, hardly gave a full-throated endorsement of using government taxing and spending, an approach embraced by many Democrats. But his remarks dramatically increase the pressure on President Bush to drop his resistance to a second stimulus package.
"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.
He urged that any stimulus bill be "well-targeted" so that its impact would be felt soon, get maximum bang for the buck in terms of economic impact, and not increase the long-term deficit. In prepared testimony, he did not specify what sorts of programs would or wouldn't meet those criteria, although the spending on roads, bridges and other infrastructure favored by many Democrats may not pass that test because such spending tends to occur over many years. The White House has long resisted calls for a second stimulus package, arguing until recently that the first stimulus needed more time to have full impact. That position has softened as the global financial crisis has worsened, however, and officials have now signaled a willingness to consider stimulus proposals from Congress.
The White House was measured in its response to Bernanke's remarks today. Press Secretary Dana Perino, speaking to reporters aboard Air Force One, said the administration was open to considering stimulus ideas, but said it would depend on the details.
Perino also declined to say whether Bush agreed with Bernanke on the need for a second stimulus, saying he would consult with Treasury Secretary Henry Paulson Jr. and other senior aides before reaching a conclusion.
"We think that there's ample opportunity when Congress gets back to talk about lots of those ideas," Perino said. "What we've seen put forward so far by the leaders in Congress, the Democrats, were elements of a package that we did not think would actually stimulate the economy. So we would want to take a look at anything very carefully."
Perino added: "We've had an open mind about it, but what we are focused on right now is the urgent need to get this rescue package implemented."
Perino made the comments during a flight to Alexandria, La., for a meeting between President Bush and local business leaders to discuss the impact of the economic crisis.
On Capitol Hill, Bernanke said that any fiscal stimulus package should also aim to ease the problems in credit markets that are a major cause for the economic downturn. If Congress passes a fiscal package, Bernanke said, "it should consider including measures to help improve access to credit by consumers, home buyers, businesses and other borrowers."
In January, as Congress considered a first economic stimulus package, Bernanke gave a more full-throated endorsement, which proved significant in building momentum for the action. In February, Congress passed a bill whose prime feature was tax rebates for most Americans.
In his testimony today, Bernanke also ticked off a list of ways that the housing crunch and financial crisis are affecting the broader economy, using dour language to characterize the risks the economy faces.
"Incoming data on consumer spending, housing and business investment have all showed significant slowing over the past few months, and some key determinants of spending have worsened," Bernanke said.
But he gave little indication of whether, or how much, the Fed is inclined to cut interest rates at its Oct. 28-29 policymaking meeting, saying that "the uncertainty currently surrounding the economic outlook is unusually large."
