Bernanke breathes life into another stimulus bill

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(Agencies)
Updated: 2008-10-21 17:09

WASHINGTON -- With a timely endorsement from Federal Reserve Chairman Ben Bernanke, there's new life to the idea of Congress returning to Washington next month to pass a second round of measures aimed at injecting life into the economy.

Federal Reserve Chairman Ben Bernanke arrives on Capitol Hill in Washington, Monday, Oct. 20, 2008, to testify before the House Budget Committee. [Agencies]

The White House said Monday that President Bush was at least willing to consider a second stimulus measure to follow a $168 billion stimulus measure passed in February and a $700 billion Wall Street rescue plan passed two and a half weeks ago.

Democrats say any stimulus bill would include items previously rejected by Bush such as road and bridge construction money and help for state budgets. Another round of tax rebates is possible as well to make the measure big enough to jolt the economy.

Sen. Charles Schumer, D-N.Y., predicted Congress would return after Election Day to work on a measure equal to or exceeding February's $168 billion stimulus package, which included $600 tax rebates for most individuals and tax breaks for businesses.

Despite the new momentum, action in November is by no means certain. There's a narrow window between the elections and Thanksgiving, and the results of the elections are likely to affect both sides' willingness to bargain.

Democrats hope Bernanke's endorsement will help bring Bush around, and they predicted that congressional Republicans would warm to the idea as well.

"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 told the House Budget Committee on Monday. It marked the first time Bernanke had endorsed the need for another round of economic stimulus.

Democrats believe Bernanke's support for the first round of stimulus steps was key to getting the White House behind the idea. But Bush has been strictly opposed to Democratic proposals such as infrastructure projects.

"We're continuing to have conversations with members of Congress, and we're open to ideas that they would put forward ... that would stimulate the economy and help us pull out of this downturn faster," White House press secretary Dana Perino said Monday, shortly after Bernanke endorsed the need for a fresh and "significant" round of government action.

"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," Perino added.

House Speaker Nancy Pelosi of California and fellow congressional Democrats are pushing a package that could cost as much as $150 billion or more.

As part of that package, Pelosi wants to resurrect a $61 billion House-passed measure that included about $37 billion in public works spending, $6 billion to extend jobless benefits, $15 billion to help states pay their Medicaid bills and $3 billion in food stamp assistance for the poor.

Democrats also are considering a second round of tax rebates to follow the $600-$1,200 checks most individuals and couples got earlier this year. That money, going directly to consumers in hopes they would spend it, could push the price tag much higher.