| January 15, 2008 | by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, and Ali Frick Contact Us | Tell-a-Friend | Archives | Permalink |
In Need Of A Jump-Start
Congress returns this week to focus on a plan to "jump-start the economy and try to shorten the slowdown that many economists say has already begun to take hold." House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV) have openly expressed their desire to work with President Bush to pass an economic package aimed at buttressing consumer confidence and avoiding a recession. "We want to work with the president in a bipartisan way to develop a fiscal stimulus package" that is "timely, targeted, and temporary," Pelosi said in a statement yesterday after meeting with Federal Reserve Chairman Ben Bernanke. The Fed Chairman, who has signaled his plans to cut interest rates by a half percentage point at the end of the month, reportedly told Pelosi that some stimulus is needed, a shift from last week when he said his thoughts on a fiscal stimulus were "inchoate." Both the administration and Congress appear to agree on the need for immediate action. Treasury Secretary Henry Paulson said any stimulus package should be put into effect swiftly, and House Financial Services Committee Chairman Barney Frank (D-MA) added that any stimulus package has to "get money into the economy quickly."
CURRENT STATE OF ECONOMY: With plummeting home sales, oil near $100 a barrel, and slowing employment, the current economic environment is perilous for a growing number of Americans. "We begin the new year with America's economy in the worst shape and the middle class at its most uncertain since the days immediately following 9/11," said Sen. Charles Schumer (D-NY). A Labor Department report last month showed the nation's unemployment rate jumped to five percent, a two-year high. "Sales at U.S. retailers stalled in December, capping the weakest holiday shopping season in five years." Additionally, economists at Goldman Sachs, Merrill Lynch, and Morgan Stanley have said the United States is probably slipping into a recession. "With signs of economic stress abounding, Bush's approval for handling the economy was 33 percent," compared with 36 percent in November. A new Washington Post/ABC News poll reports that "concern about the economy has jumped to the front of voters' minds as optimism about the nation's direction has dipped to its lowest point in more than a decade."
STIMULUS PLANS: Congressional leaders are insisting that conservatives not inject their desire to extend the Bush tax cuts for the wealthiest Americans "into negotiations of a short-term rescue package intended to dampen the impact of a recession." But some Republicans are insisting on keeping long-term tax cuts on the table. "[I]t isn't too soon to talk about making permanent the Bush tax cuts. ... I think that has to be part of the discussion," said Rep. Dave Camp (R-MI). The President is reportedly "weighing a tax rebate targeted at low- and middle- income Americans, according to a government official. Bush probably will announce the plan in his Jan. 28 State of the Union speech. Meanwhile, Democratic leaders in Congress are designing their own package, which may include public works spending, aid for the poor and a tax rebate." Leading Democratic presidential candidates John Edwards, Hillary Clinton, and Barack Obama have unveiled stimulus plans of their own. By contrast, Republican candidates Mitt Romney, John McCain, and Rudy Giuliani "are much more skeptical about short-term government rescues." The Center for American Progress has recommended that any stimulus plan adhere to four principles: 1) stem the decline of home values, 2) ensure the stimulus contains immediate impact, 3) target the benefit to those recipients most likely to spend it, and 4) strengthen the economy in short-term ways that inure to America's long-term economic benefit.
SPOTLIGHT ON MICHIGAN: Today, voters in Michigan head to the polls in the state's primary with economic concerns looming at the forefront of their minds. Michigan "has lost about 275,000 industrial jobs since 2000, and has the nation's highest unemployment rate, 7.4 percent." Detroit has been hit by "more foreclosure filings than any other city in the one hundred largest US metropolitan areas." The Big Three U.S. automakers have shed both white- and blue-collar jobs, and cutbacks from auto suppliers have spread through other sectors of the Michigan economy. But as they campaign in Michigan, most Republican candidates "are sticking to their existing proposals for lower taxes and less regulation," unwilling to propose a larger role for government intervention to help revive the sagging economy. New York Times columnist Paul Krugman writes that "recent statements by the candidates and their surrogates about the economy are quite revealing." For instance, Sen. John McCain (R-AZ) acknowledges, "The issue of economics is not something I've understood as well as I should."
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