Bush, Bernanke endorse economic stimulus

Senior aides to House Democrats and Republicans reviewed an emerging plan that included tax rebates for individuals — from $300 to as much as $800 — breaks for businesses and more money to help food stamp recipients and the unemployed. Additional aid to help states complete construction projects was also among the proposals under consideration, according to officials familiar with the discussions. They spoke on condition of anonymity, saying they did not want to pre-empt an eventual announcement.

House Republican leader John Boehner of Ohio said he was encouraged, and so did Majority Leader Steny Hoyer, D-Md. Hoyer said of his counterpart, “He indicated that he wants to work together to get something done.”

Pelosi said she wanted legislation approved within a month and said the government must “spend the money, invest the resources, give the tax relief in a way that again injects demand into the economy, puts it in the hands of those who need it most and into the middle class ... so that we can create jobs.”

But Boehner said: “For this bill to become law, it cannot become a Christmas tree” for Democrats to attach their programs. “It’s hard to get anything moving within a year, and most of us believe that if we’re going to have a stimulative effect at helping to revive what is becoming a sluggish economy, it needs to happen quickly.”

White House spokesman Tony Fratto said Bush does not believe a stimulus should be offset — or paid for — by any tax or spending changes elsewhere. Some deficit-hawk Democrats have pushed for one but it is not expected to be part of a package.

For now, Bernanke was hopeful the country could skirt a dangerous downturn. “We’re not forecasting recession but, rather, at this point, slow growth,” he told lawmakers. Still, the toll of the housing and credit debacles will be felt for some time, he added. “We believe we’ll see below-trend growth certainly in 2008 and probably early into 2009, as well.”

When asked about a stimulus package totaling around $100 billion, he said the impact could be “significant,” not “window dressing.”

Temporary equipment tax writeoff provisions for businesses also could spur spending, which would help the economy, Bernanke said. But he warned: “I hope Congress can resist having a huge list of things” that would weigh down legislation and not help the economy in the short run.

The fragile state of the economy has gripped Wall Street and Main Street and is a rising concern among voters. The situation has galvanized politicians — including those vying to be the next president — and poses the biggest test to Bernanke, who took over the Fed nearly two years ago.

Said House Budget Committee Chairman John Spratt, D-S.C.: “It has become increasingly clear that our economy is slowing down, entering a slump if not a recession.” Rep. Dan Lungren, R-Calif., likened a stimulus package to a “vitamin B-12 shot.”

In his testimony, Bernanke again pledged to aggressively slash a key interest rate as needed to bolster the economy. Many economists believe the Fed will lower its key rate, now at 4.25 percent, by a bold half-percentage point at its next meeting on Jan. 30. Some critics on Wall Street and elsewhere have second-guessed Bernanke for not taking action sooner and more forcefully.

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