Fed makes move to help bust credit logjam

Sen. Charles Schumer, D-N.Y., predicted Congress would return after Election Day to work on a measure equal to or exceeding February’s $168 billion stimulus package, which included $600 tax rebates for most individuals and tax breaks for businesses.

Despite the new momentum, action in November is by no means certain. There’s a narrow window between the elections and Thanksgiving, and the results of the elections are likely to affect both sides’ willingness to bargain.

Democrats hope Bernanke’s endorsement will help bring Bush around, and they predicted that congressional Republicans would warm to the idea as well. Bush has been strictly opposed to Democratic proposals such as infrastructure projects.

“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 Monday, shortly after Bernanke endorsed the need for a fresh and “significant” round of government action.

“What we’ve seen put forward so far by the leaders in Congress, the Democrats, were elements of a package that we did not think would actually stimulate the economy,” Perino added.

House Speaker Nancy Pelosi of California and fellow congressional Democrats are pushing a package that could cost as much as $150 billion or more.

As part of that package, Pelosi wants 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 pay their Medicaid bills and $3 billion in food stamp assistance for the poor.

Democrats also are considering a second round of tax rebates to follow the $600-$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.

As the value of their homes, pension funds and other investments has dropped in the past year, consumers have become more reluctant to spend. Consumer spending makes up more than two-thirds of the economy. When spending declines, it forces businesses to either stop hiring or cut jobs.

Unemployment now stands at 6.1 percent. Economists predict it could go as high as 7.5 percent in 2009.

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