Bernanke gives nod to more government stimulus
Posted: Monday, October 20, 2008 10:04 pm
By JEANNINE AVERSA
AP Economics Writer
WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke told Congress today a fresh round of government stimulus is a good idea because there’s a risk the country’s economic weakness could last for some time.
Bernanke’s remarks before the House Budget Committee marked his first endorsement of another round of energizing stimulus, something that Democrats on Capitol Hill have been pushing. The Bush administration, however, has been cool to the notion.
“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 said in prepared testimony to the panel.
A trio of hard blows from the housing, credit and financial crises has badly pounded the economy.
Many analysts predict the economy will shrink later this year and early next year, meeting the classic definition of a recession. Some believe the economy already jolted into reverse during the July-to-September quarter.
The nation’s unemployment rate — now at 6.1 percent — could hit 7.5 percent or higher by next year, according to some predictions.
Bernanke suggested that Congress design the stimulus package so that it will be timely, well targeted and would limit the longer-term affects on the government’s budget deficit, which hit a record high in the recently ended budget year.
Any stimulus package would need to kick in quickly to entice people and businesses to boost spending and buck up the economy during the period in which economic activity would be otherwise weak, Bernanke said.
Bernanke said the package also should include provisions that would help break through the stubborn credit clog that is playing a major role in the economy’s slowdown.
“If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, home buyers, businesses and other borrowers,” Bernanke said. “Such actions might be particularly effective at promoting economic growth and job creation,” he added.