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Tuesday, December 25, 2007

Congress Mulling Ways To Stimulate Economy

Economists like former Treasury Secretary Lawrence Summers on the left and Harvard professor Martin Feldstein on the right, have been urging the government to give the economy a fiscal boost.

WASHINGTON - U.S. lawmakers have begun to consider whether the slowing U.S. economy needs the government's helping hand, but it is not clear what further steps, if any, the White House might be willing to consider.

When President Bush declared Thursday that "all options" would be weighed to counter a housing slump some fear will lead to recession, Democrats and Republicans on Capitol Hill already had been thinking of ways to give the economy a lift.

Over the next month or so, if economic indicators worsen, lawmakers will be eager to jump on legislation to calm voters' jitters just months before presidential and congressional elections are held in November.

"There is no doubt that we are going to deal with an economic slowdown/recession and we need to do what is responsible," said Rep. Rahm Emanuel of Illinois, who holds a high-ranking Democratic leadership job in the House .

Speaking to reporters Wednesday -- two days after some lawmakers had berated Bush for declaring "This economy's pretty good" -- Emanuel previewed Democrats' 2008 legislative priorities. Tax cuts and infrastructure investments were among the items he touched on, but offered no details.

After Bush's "all options" comment Thursday, the White House appeared to try to tamp down speculation the administration would be pushing out a stimulus plan soon.

"All options are always on the table," White House spokesman Tony Fratto said Friday.

A number of prominent economists, from former U.S. Treasury Secretary Lawrence Summers on the left to Harvard University professor Martin Feldstein on the right, have been warning of recession risks and urging the government to give the economy a fiscal boost.

"You have President Clinton's secretary of the Treasury and President Bush both talking about an economic stimulus package. There's more likely to develop some kind of consensus around that, and my belief is the president intends to head in that direction as well," said Rep. Roy Blunt of Missouri, the second-ranking House Republican.

Blunt said discussions with the White House on an economic stimulus plan had not reached a detailed stage yet.

Still, senior administration officials are showing clear signs of concern about how the housing slump and related credit-market strains are being felt around the country.

Treasury Secretary Henry Paulson, on a recent trip to Florida, Missouri and California, heard first-hand from people who had lost their homes and was told by bankers and community activists that worse was to come in 2008, when a wave of subprime mortgage loans are due to reset at higher interest rates that many homeowners are unlikely to be able to bear.

Paulson gamely maintained that the economy remained sound -- "I think and believe we will continue to grow," he told audiences -- but he conceded the housing situation, in which an estimated 1.8 million subprime mortgages face rate resets next year, was "unprecedented."

The administration helped broker a mortgage industry plan to temporarily freeze rates on some mortgages facing resets in coming years, but critics have said it is too little, too late.

The House Budget Committee began an early look at the prospects of a recession with a Dec. 6 hearing. Chairman John Spratt, a South Carolina Democrat, questioned Feldstein's call for tax cuts and wondered whether Congress instead should focus on stemming "a raft of foreclosures" in the housing market if Bush's private-sector remedy falls short.

But broader stimulus legislation, including tax cuts, is obviously on the committee's radar screen.

In a telephone interview Friday, Thomas Kahn, the panel's staff director said, "Clearly a lot of discussions are taking place now. There is an appreciation that some people in this economy are hurting."

He added that January's employment and retail sales reports could provide more clarity on the need for action.

"We would hope that any measure, if adopted, would be targeted, temporary and fully offset over the long-term," Kahn said, adding that it would be "a mistake to take steps that would address a short-term economic problem while making our long-term budget deficits worse." (Additional reporting by Glenn Somerville; Editing by Leslie Adler)

By: Richard Cowan

Copyright 2007 Reuters. Click for Restrictions

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Tebinfea said...

Hello dear friend.
Good Wednesday.