Democrats Consider Second Fiscal Stimulus Package

by Leroy Baker, Tax-News.com, New York

16 July 2008

Nancy Pelosi, Speaker of the US House of Representatives, announced on Tuesday that a proposal by senior Democrats for a second economic stimulus package has the backing of several economic experts.

"We will be proceeding with another stimulus package and we hope that we will once again be able to work in a strong bipartisan way with our colleagues here in the Congress and with the President of the United States," Pelosi commented at a news conference following an economic forum between House leaders and five economists.

The panel of economists consulted by the Democrats included: former Secretary of the Treasury, Dr. Larry Summers; Dr. Alan Sinai from Decision Economics, Inc.; Alan Blinder of Princeton University; Douglas Elmendorf of the Brookings Institution; and Rebecca Blank of the Brookings Institution.

Pelosi went on to note that while the tax rebates in the first economic stimulus package seem to have had a positive effect on the US economy, negative economic factors, such as rising fuel and food prices and the mortgage crisis, in the weeks since the rebate checks have been mailed out conspired to negate much of their intended impact.

"So while they may have saved the second quarter from a technical definition of a recession, the fact is that we are into a third quarter and we need to have another stimulus package," she argued.

Pelosi also hoped that tax rebates for the middle classes would not dominate a second stimulus package, and urged President Bush to consider other means of injecting stimulus into the economy through such things as food stamps, infrastructure investment, Medicaid and aid to the states.

"Our distinguished experts here say, again, something targeted, temporary, and timely, as were our criteria before, is very important," she remarked.

However, Bush told a news conference that he thought such action would be premature.

“We ought to see how the first one works,” he said. “Let it run its course. I’m an optimist.”

As a result of the first temporary economic stimulus package, signed into law by Bush in February, the Treasury Department expects to have sent rebates to about 130 million American households by the end of the summer. These rebates provide eligible Americans with payments of up to USD600 a person, USD1,200 for couples, and USD300 per child.

The legislation also contained provisions aimed at small businesses, including temporary enhanced small business expensing, and a temporary bonus depreciation allowance. However, Pelosi gave no indication that she would be in favor of extra tax incentives to help businesses in a second stimulus package.

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