The Wall Street Journal-20080123-Stimulus Plan Could Be Expanded- Overseas-Market Turmoil- Fed Rate Cut Add Urgency To Efforts to Help Economy
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Stimulus Plan Could Be Expanded; Overseas-Market Turmoil, Fed Rate Cut Add Urgency To Efforts to Help Economy
WASHINGTON -- With financial markets in turmoil, President Bush and Democratic leaders on Capitol Hill are opening the door to an even broader effort to shore up the shaky U.S. economy.
The White House, which is negotiating with Democratic leaders over a stimulus bill that administration officials had initially targeted at about $145 billion, isn't ruling out expanding the package. On Capitol Hill, Democrats have discussed crafting a two-part bill in which additional stimulus policies could be triggered by negative factors like increasing unemployment.
In addition, they have discussed the possibility of drafting a second economic bill later in the year that would pick up longer-term growth measures, such as spending on infrastructure and aid to states, that have been dropped from the current bill to speed completion.
The urgency of the discussions picked up yesterday after turmoil in overseas markets and the Federal Reserve's rate cut. The fact that lawmakers are already considering more options, even before completing the first stimulus package, is a testament to how economic woes have zoomed to the top of the national political agenda.
"Until this morning, there was a good deal of resistance" to a larger package, New York Democratic Sen. Charles Schumer said yesterday. Now, the possibility could provide both sides with greater flexibility as lawmakers try to work out a mix of tax breaks and new spending that would satisfy Democrats and Republicans.
After meeting with congressional leaders yesterday, Mr. Bush said he felt good about the prospects of reaching a deal. "I'm confident that we can get an agreement passed, and we can get an agreement passed in relatively short order," he said. "All of us want to get something done that will be temporary and effective, and all of us want to get something done as fast as possible."
Mr. Bush's press secretary, Dana Perino, said the president still favors a package of about $145 billion. But she was careful yesterday not to shut off discussion of a larger package that could accommodate other priorities. "I'm not going to close the door," Ms. Perino said. Others in the Bush administration stressed that the president isn't wedded to the idea that the stimulus package must measure exactly $145 billion. Mr. Bush's wording last week, when he called for a package valued at "about 1% of GDP," appeared intentionally chosen to signal his flexibility.
The White House also appeared to be tempering expectations about the overall design of the stimulus package. Last week, a potential battle line was emerging between the White House and congressional Democrats about who should get the proposed rebate: everyone, or only those who pay income taxes. Ms. Perino emphasized that the administration was willing to work closely with Congress on the details of the package, including the distribution. "We're going to have to be talking with Congress as to . . . who should be getting the relief," she said.
White House and congressional officials have been engaging in quiet discussions during the past several days. While many details remain to be worked out, the basic parameters of a package appear to be emerging, congressional aides said. The measure is expected to include the much-debated tax rebate, as well as a tax incentive to stimulate business investment and added spending on food stamps and benefits for unemployed workers.
Senate Majority Leader Harry Reid of Nevada said he hoped a bill would be completed in the three weeks before Congress's next recess, in mid-February. "We need to have something on the president's desk by then," he said.
One possibility includes a second-phase plan with measures that would kick in only if economic conditions further deteriorate. A second idea would be to craft a much larger piece of legislation that would "help the economy in the longer term," Mr. Schumer said. It isn't clear whether lawmakers will act on one or both of those ideas.
With lawmakers looking for answers, several proposals -- from loosening rules for borrowers in bankruptcy to sweetening the research-and-development tax credit -- are likely to come up for consideration. Lawrence Mishel, president of the Economic Policy Institute, a left-leaning think tank, is urging consideration of $40 billion in spending on infrastructure. Such a package, Mr. Mishel said, could be crafted to ensure money reaches the economy this summer, especially if it is focused on school maintenance or already designed highway projects that are awaiting funding.
Governors are pressing for relief in the range of $10 billion to $12 billion. That could help prevent economy-slowing budget cuts and tax increases as states try to balance their budgets. There are more hurdles for state aid this time than in 2003, when states received $20 billion in a stimulus bill. Republicans are pushing back against spending, and Democrats appear to be more focused on other priorities in the bipartisan talks.
Despite the growing clamor to expand the stimulus proposals, some Democratic economic advisers cautioned against overreacting. "I don't see any reason to go beyond $145 billion at this stage," said Jason Furman, a Brookings Institution scholar and former Clinton administration aide who advises Democrats on economic policy. "There is no doubt that the economy is weakening and $145 billion, together with the Fed moves, would be a major jolt. But we still only have about one month [of] bad macroeconomic data . . . with little weakness in the months leading up to that."
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John D. McKinnon and Michael M. Phillips contributed to this article.
