Tuesday, October 21, 2008

Second U.S. Stimulus Package Seems Increasingly Likely

Bernanke backs new stimulus package- Financial Times
Fed chairman endorses new round of stimulus - New York Times

Amid market volatility and investor, talk over the weekend and early this week turned to the possibility of a second stimulus package from the American government. While first discussed by Congressional leaders early last week, speculation regarding the potential for such additional stimulus legislation intensified as the idea received support from a number of officials within the Bush Administration and from Federal Reserve Chairman Ben Bernanke who suggested that a new stimulus package could prevent a "protracted slowdown" in the American and global economies.

While Chairman Bernanke's remarks seemed to suggest that a stimulus package should focus on increasing the availability of credit to individuals (something that the Federal Reserve and the Treasury Department have been working to do for major financial institutions since the passage of the first stimulus package), there are already a number of different opinions as to what possible stimulus legislation should contain.

Congressional Democrats are discussing a potential $150-300 billion package that would focus heavily on providing aid to state and local governments, but might also include an extension of unemployment benefits, food stamps programs, and energy assistance for low-income Americans. In response to this proposal, House Republicans put forward their own list of policy ideas that they believe would be more effective in "stab[ilizing] the economy long term." The Republicans' proposals include suspension or elimination of capital gains taxes, fast-tracking off-shore drilling, and government guarantees of interbank lending.

In the wake of the supportive statements made by Chairman Bernanke and White House officials, Congressional Democrats expressed their desire to work with Republicans and hopefully pass the second stimulus package before the end of the year, in a post-election session.

Discussion Questions:
1) Is a new economic stimulus package necessary?
2) Is this the best time to pass a second stimulus package?
3)Ideally, what should be included in stimulus legislation? Aid to governments? Tax cuts? Credit guaranteeing measures?

1 comment:

Avatar said...

Foreign ownership of the national debt is as of July 2008 $2.7 trillion. The balance is held by Intragovernmental Holdings and Debt Held by the Public. Where does the money for all these bailouts and stimulus program come from?