Bush, Bernanke: Time is right for new stimulus

updated 4:53 p.m. ET Oct. 20, 2008

WASHINGTON - Momentum is building for a fresh dose of economic stimulants to boost the country out of the doldrums — perhaps by putting more money in Americans’ pockets. The White House said Friday that President Bush was open to some sort of action after Federal Reserve Chairman Ben Bernanke warned the slump could drag on without the extra bracing tonic.

On Wall Street, stocks bolted higher, with the Dow Jones industrials rising 413 points. There also were some new signs that credit conditions were thawing a bit.

The national economy, already wobbling, has been rocked by a trio of hard punches from the housing, credit and financial crises. With a recession widely seen as inevitable, if not already under way, the focus in Washington has shifted to the questions of how bad, how long and how to limit the pain.

There is increasing talk of a post-election special session calling Congress back to the Capitol. But urgency varies greatly according to whom you talk to — and when.

“We’re continuing to have conversations with members of Congress, and we’re open to ideas that they would put forward ... that would stimulate the economy and help us pull out of this downturn faster,” White House press secretary Dana Perino said around noon Friday, shortly after Bernanke endorsed the need for a fresh and “significant” round of government action.

A couple of hours later, Bush seconded those remarks, but he also said in a more optimistic tone: “I have heard that people’s attitudes are beginning to change from a period of intense concerns — I would call it near panic — to being more relaxed.” He commented after a closed meeting with business leaders in Alexandria, La.

If congressional leaders and Bush — who has been cool to more federal stimulus spending given already exploding budget deficits — were to hash out an acceptable package, it would require a special session after the Nov. 4 elections.

If an agreement can’t be worked out, the effort probably would be taken up by the next Congress and the next president. Democrat Barack Obama has strongly advocated more government stimulus, while Republican John McCain is keeping his options open.

House Speaker Nancy Pelosi of California and fellow congressional Democrats are pushing a package that could cost as much as $150 billion. Some economists, however, have advised them in recent days that to have a real impact, the total would have to be far larger, as much as $300 billion.

As part of that package, Democrats want to resurrect a $61 billion House-passed measure that included about $37 billion in public works spending, $6 billion to extend jobless benefits, $15 billion to help states to pay their Medicaid bills and $3 billion in food stamp assistance for the poor.

The Democrats also are considering a second round of tax rebates to follow the $600 to $1,200 checks most individuals and couples got earlier this year. That money, going directly to consumers in hopes they would spend it, could push the price tag much higher.

Unemployment — now at 6.1 percent — is expected to hit 7.5 percent or higher next year. And millions of Americans have been watching their retirement nest eggs and home values shrivel.

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