Another stimulus bill gains momentum

Lawmakers and officials moved forward forging a second fiscal¹ stimulus² bill after Federal Reserve Chairman Ben Bernanke endorsed³ the idea and the Bush administration dropped its opposition⁴.

Bernanke warned legislators on Monday the credit crunch⁵ is "hitting home", and recommended measures to help borrowers. White House Press Secretary Dana Perino said President George W. Bush was "open to the idea" of a new stimulus.

Momentum⁶ for fresh measures built after an earlier stimulus package failed to prevent a jump in the unemployment rate to a six-year high and the longest slump⁷ in retail⁸ sales since at least 1992.

Bernanke "had to do what he did" in supporting a further federal stimulus measure, said Lyle Gramley, a former Fed governor who is now senior economic adviser⁹ at Stanford Group in Washington. "If he went up there and said, 'Well, I'm indifferent to a stimulus package, I'm opposed to it,' he would be sending the wrong signal."

House Budget Committee Chairman John Spratt said a new push would be patterned after earlier proposals made by House Speaker Nancy Pelosi that extend jobless benefits, fund infrastructure¹⁰ projects such as road and bridge construction, and help cash-strapped state and local governments.

Bernanke told the Budget Committee yesterday that the danger of a "protracted¹¹ slowdown" and a "weak" outlook for the US economy into next year convinced him to support a new round of economic stimulus. A similar endorsement¹² by Bernanke earlier this year helped clear the way for a $168 billion measure enacted¹³ in February.

The Bush administration is "open to the idea" of another economic stimulus package, though approval would depend on details drafted by Congress, Perino said. Proposals "put forward so far" by Democratic leaders in Congress "were elements of a package we did not think would actually stimulate¹⁴ the economy, so we would want to take a look at anything very carefully," Perino said.

Democratic presidential candidate Barack Obama last week urged Congress to act "as soon as possible" before the Bush administration leaves office on January 20 to pass a stimulus measure. If Congress and the president didn't act "it will be one of the first things I do as president of the United States," Obama said in an October 13 speech in Toledo, Ohio.

In a related development, China yesterday said the Asia-Europe Meeting that begins in Beijing on Friday would be the "perfect platform" for leaders to discuss ways of dealing¹⁶ with the crisis, and urged greater international cooperation.

Foreign Ministry¹⁷ spokesman Qin Gang said Beijing had adopted a "responsible and constructive¹⁸" attitude in dealing with the crisis but added that "developing countries' interests and concerns should be fully¹⁵ respected and safeguarded".

Meanwhile, the European Union vowed¹⁹ yesterday to work at the Asia-Europe Meeting to enlist²⁰ China and India for a series of top-level meetings to discuss strengthening financial institutions and improving cross-border regulation.

French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso said they would use the meeting to urge the two fast-growing economies to join in taking responsibility for stabilizing²¹ the world economy.