New Push Is On for $50b Economic Stimulus Package
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The final pre-Election Day push by Democrats in Congress will be to try to pass a $50 billion economic stimulus program.
The proposal, details of which are in the works, would cost about one-third as much as February’s $168 billion stimulus package. Unlike the earlier stimulus package, the new proposal is not expected to have tax rebates as its centerpiece.
Concern over the growing budget deficit could galvanize Republican opposition to a second stimulus package, which the White House isn’t supporting. Yesterday, the Congressional Budget Office predicted a $407 billion deficit for this fiscal year and a record deficit of $438 billion for the fiscal year beginning next month.
Yet, national concern over job loss and the housing slump could edge out concern over government spending, economists say.
“Deficit hawks are a kind of seasonal bird,” an economist at the Heritage Foundation, James Foster, said.
Economists and congressional aides said proposals under consideration for a new stimulus plan include increasing unemployment benefits; expanding both food stamps and a heating subsidy for the poor; increasing federal spending on Medicaid, and funding highway and school construction.
Democrats would have liked to have seen some of these items in the February stimulus package. That plan had two parts: a tax rebate for individuals and a tax deduction on major purchases by businesses.
The new stimulus should focus on both jobs and “helping the states through these tough times so they don’t make budget cuts,” Rep. Rahm Emanuel, a Democrat of Illinois, told reporters in a conference call.
The House majority leader, Rep. Steny Hoyer of Maryland, said he did not expect the proposed second stimulus to include rebates, Congressional Quarterly reported. In the past, Senator Obama has proposed a $1,000 rebate to families that would be paid for by taxing oil companies.
“I would be surprised to see a package that would be less than, you know, $50 billion to $75 billion,” Senator Schumer said, according to an Associated Press report.
A former treasury secretary, Lawrence Summers, endorsed the idea of a second stimulus plan yesterday in testimony to the House Budget Committee.
“I believe the balance of risks suggest a compelling case for a significant fiscal stimulus program that increases the deficit in the short run,” Mr. Summers, who has given advice to the presidential campaign of Mr. Obama, said, according to the Wall Street Journal.
Neither Mr. Obama, the Democratic nominee for president, nor Senator McCain, the Republican nominee, issued statements yesterday addressing the proposals. Neither campaign responded to calls for comment.
Lately, Mr. Obama has sought to portray Mr. McCain as oblivious to the hard times experienced by many Americans.
At a press briefing, a White House spokeswoman, Dana Perino, said the administration wasn’t working on another stimulus package, according to a transcript. She chalked up part of this year’s deficit to the earlier stimulus package.
One Republican whom Democrats will be courting for support is Rep. Peter King of Long Island, who has sought to get the federal government to pay more of states’ Medicaid bills. That proposal could be a major part of any deal. Under different plans being discussed, one congressional aide said, the federal government would pay an extra 3% or 4% of the costs of Medicaid.
A stimulus package is intended to provide a short-term boost to the economy through job creation or increased spending. Economists are debating whether the proposals by the Democrats are the best policies to accomplish those ends.
“This is stuff they want to do politically,” a labor policy expert at the Heritage Foundation, James Sherk, said of some of the spending proposals likely to be included in a Democratic proposal. “But ‘stimulus’ sounds better than saying, ‘Let’s spend $80 billion.'”
In an interview, Mr. Sherk singled out for criticism the proposal to lengthen eligibility for unemployment, which he said would encourage some people to stay out of work.
This summer, Congress extended the length of unemployment benefits to nearly 10 months from less than seven months. That is set to expire by June, but a new stimulus package could extend the deadline further.