Today, testifying before the House Budget Committee, Chairman of the Federal Reserve Board Ben Bernanke offered support for an economic stimulus package, which is something that Congress plans to consider during a lame-duck session following the Nov. 4 election. Bernanke said that a stimulus package “might be particularly effective at promoting economic growth“:
With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by Congress at this juncture seems appropriate.
Last week, Sen. Harry Reid (D-NV) unveiled a stimulus package that includes “increased spending on infrastructure, an extension of unemployment benefits and relief for struggling homeowners.” However, House conservatives are balking at some elements of the plan, particularly those aimed at infrastructure projects.
Rep. Roy Blunt (R-MO) said a stimulus bill should not be used to finance “a huge public works plan.” Conservatives have released their own stimulus proposal, which calls to “ease the uncompetitive nature of our nation’s tax rates“:
Nothing being discussed will ease the uncompetitive nature of our nation’s tax rates. Nothing being discussed will bring a single dollar of private capital into our markets, which would help stabilize and restore American families’ savings and retirement accounts.
Conservatives propose, among other things, “lowering the 35-percent tax rate on money U.S. companies make overseas, suspending the capital gains tax for individuals and businesses that purchase equity over the next two years and lowering the corporate tax rate.” If this all sounds familiar, that’s because it is. When House conservatives released their counter-proposal to the $700 economic bailout bill, it included many of the same provisions.
As Nobel Prize winning economist Paul Krugman noted, though, this is “a good time to engage in some serious infrastructure spending“:
The usual argument against public works as economic stimulus is that they take too long: by the time you get around to repairing that bridge and upgrading that rail line, the slump is over and the stimulus isn’t needed. Well, that argument has no force now, since the chances that this slump will be over anytime soon are virtually nil. So let’s get those projects rolling.
The New York Times reported today that a “consensus” is emerging to “let the deficit rise” while combating the financial crisis. Indeed, an economic stimulus package should take precedence over short-term concern for the budget deficit.