Even though many politicians – including President Bush – are still reticent to use the “R” word (recession), economic pundits, including those in the Bush administration are using it. Ed Lazear, President Bush’s chief economic adviser, has been quoted as saying that “parts of the country” are in a recession.
With the threat (or reality, depending on where you land) of a recession looming, there is now a rush to consider a second stimulus package. Federal Reserve Chairman Ben Bernanke has told Congressional leaders that “consideration of a fiscal package by the Congress at this juncture seems appropriate.” He did not, however, use the “R” word, instead referring economy as in a “protracted slowdown.” His suggestions for a stimulus package include direct lending from the federal government to states (a measure that Governor Schwarzenegger of California also supports), consumers and businesses; he has also backed the idea of additional tax credits.
As Bernanke made his announcement, it seems that even President Bush is warming to the idea of a second stimulus package. Just two months after the President objected to the idea of a second stimulus package, the White House has signaled that President Bush would now be “open” to the idea of an additional package. The administration has not agreed to any specific plan and has not indicated which details he would approve.
The Democrats have floated several plans but have not reached a conclusion as to the best overall package. One version included a small rebate check but was not expected to pass and has, in recent weeks largely been ignored. The most recent plan proposed by House Speaker Pelosi focused on extending jobless benefits and increasing infrastructure spending but does not include rebate checks.
The Republicans have been much more apprehensive about a second stimulus plan. Most in the GOP are not on board with the Democratic proposals. Instead, the GOP wants to focus on additional tax breaks including a temporary elimination of capital gains tax on stocks. They have also suggested offering capital gains exclusions for taxpayers with multiple residences in an effort to reduce foreclosures by those who own more than one home.
With such disparate proposals on board, it’s highly unlikely that a resolution will be reached before the end of the year. Democrats have indicated that they are hopeful that if Obama wins the White House, they may have leverage to pass legislation within two weeks of the election – Congress is off session until after the elections. However, the reality is that no matter who wins, Bush will remain in the White House through mid-January. His approval would be needed for any stimulus package as the threat of veto would remain so a compromise will be necessary.
So, there are lots of reports being circulated about what could happen. But to be clear, despite rumors to the contrary, no second stimulus package has been approved and no additional stimulus checks are being mailed as a result. Keep checking back for details as they become available.
Some said that the first stimulus package didn’t do that much good since many used it to buy essentials, some just saved it, instead of taking it out to shop. I wonder how much of this stimulus thing is to give a psychological boost and how much is to actually help out your finance, and in turn, the economy. I guess it depends on different people’s income and debt level as well.
I live in the rustbelt; and, I’ll tell you, we’ve been in a recession for some time. Actually, it reminds me a little of the stagflation we saw during the Carter administration. The cost of necessities like food and gasoline have gone up while salaries has not kept pace and jobs are disappearing in droves. People are also running to the South for the job market (we really didn’t need Ike–that just left more people damaged!). We also have bridges and roads that really need some work. Needless to say, I prefer a stimulus package that includes infrastructure work. It will at least temporarily provide some jobs up here and stop the outflux of our tax base. In terms of a capital gains cut, I’ve had to sell some assets this year; and I’m probably looking at carrying some of my capital losses forward — for the first time ever. Put the people who can work to work. I’ll take care of myself, thank you, and it’s getting kinda lonely up here.
I am completely against a second “stimulus package.”
The Federal debt on a cash basis is over 10 trillion dollars and rising rapidly. On an accrual basis the debt is six times as much.
The Federal Government needs to spend less money.
Mike,
That’s just crazy talk. Spend less? What kind of fiscal responsibility is that? 😉