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Bernanke Indicates Backing For Stimulus Package

MELISSA BLOCK, host:

This is All Things Considered from NPR News. I'm Melissa Block in Washington.

ROBERT SIEGEL, host:

And I'm Robert Siegel, this week in New York City. And Melissa, here's the irony of our situation.

BLOCK: Uh-huh.

SIEGEL: I'm here in New York, because of the financial crisis. I spoke today with the governor of New York about it, and as you'll hear in a few minutes, I watched 250 Wall Street traders doing what they do and what passes here for an extremely quite day on the credit markets.

It was a very good day at the stock market, actually. But the biggest financial news today comes from your neck of the woods, from Washington DC.

BLOCK: That's right, and that's because Federal Reserve Chairman Ben Bernanke was here, testifying on Capitol Hill today. And he offered his support for a new economic stimulus package. A bit later in the day, that support was echoed by the White House. NPR's Jim Zarroli has that story.

JIM ZARROLI: Bernanke told the House Budget Committee today that another stimulus plan may be just what the economy needs right now. He said, yes, federal budget deficits are high, and any decision to spend money now would burden future generations.

Mr. BEN BERNANKE (Chairman, Federal Reserve): All that being said with the economy likely to be week for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate.

ZARROLI: Not long after Bernanke spoke, the White House said it too, was open to the idea of another plan, depending on how it's structured. And it said it would look to Bernanke and others for guidance. The idea already has the support of key Congressional Democrats, who argue that the money should go toward big infrastructure projects, and also to help states cope with widening budget deficits. Bernanke stopped short of endorsing those ideas, he refused to say how a stimulus package should be structured, or how much money should go into it, even when he was pressured to do so by Democratic Congresswoman Rosa DeLauro of Connecticut.

Mr. BERNANKE: I cannot tell you, as Congress, what number you should pass. That's up to you.

Representative ROSA DELAURO (Democratic, Connecticut): What would you suggest, 150?

Mr. BERNANKE: If you undertake a fiscal package, given the slowing of the economy, I think it should be significant. But I can't give you a number.

ZARROLI: Bernanke would only say that a stimulus package should be well-targeted and timely, so it takes effect soon when it's needed. Still, Bernanke's support for a plan lends considerable heft to the idea.

Earlier this year, Congress and the White House approved a plan that resulted in more than $100 billion in rebate checks being sent to tax payers. The checks are credited by some economists with helping to forestall a recession.

But the checks have long since been cashed, and the economy has only slowed further. Nariman Behravesh, chief economist at the research and consulting firm, Global Insight, says another such plan could do some good right now.

Dr. NARIMAN BEHRAVESH (Chief Economist, Global Insight): I think under the current circumstances, given that we're not quite sure when the whole financial system is going to unfreeze, so to speak, another shot in the arm from fiscal policy is a good idea. I think it's going to be needed, and it's going to certainly help to make this recession less severe than it otherwise might be.

ZARROLI: But Behravesh says it will be important to structure the plan the right way. The last time around, a lot of tax payers reportedly used their rebate checks to pay debt, instead of spending them. And when enough people do that, it can limit the effectiveness of the stimulus plan. He says a new plan should be designed to encourage spending. Whatever gets decided, Wall Street seemed to like the idea of a second stimulus plan, stock prices rose sharply early in the day, but went up even more after Bernanke spoke, and the market finished the day much higher. Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Jim Zarroli
Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.