Days before next Tuesday's U.S. presidential and congressional election, U.S. lawmakers heard from economists and other experts about the impact of recession on Americans, and pros and cons of a new economic stimulus package for the U.S. economy. VOA's Dan Robinson reports, majority Democrats are expected to call Congress back into session in mid-November to focus on the U.S. financial crisis and possible new legislation aimed at stimulating the U.S. economy.
This past week, House Speaker Nancy Pelosi pointed to data showing a decline in U.S. Gross Domestic Product (GDP) in the third quarter of 2008, and an increase in the numbers of Americans applying for unemployment benefits, saying this underscores the need for what she called a fiscally responsible stimulus plan.
Economists and other experts offered projections about just how bad the economic downturn, which many said constitutes a recession, may be.
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Appearing before the bipartisan Joint Economic Committee, J. Steven Landefeld, Director of the Bureau of Economic Analysis, says whether it's called a recession or not, the economy is in a dramatic slowdown:
"We all know there has been a huge loss of consumer wealth during this period. Household's disposable income share going to energy has certainly gone up considerably over time and the economy is growing at a rate too slow to generate new jobs sufficient to keep up with labor force growth, population growth, and growth in productivity," he said.
Nuriel Rubini, a former U.S. treasury department official now at New York University, flatly calls it a recession, and predicts it will last 18 and possibly as long as 24 months, involving a cumulative decline in economic output of more than four percent, the worst since World War II.
Rubini urges Congress to act on a second fiscal stimulus of at least 300 billion dollars, saying that without support for Main Street [average Americans], government steps to support financial markets could be undone:
"This action has to be taken right away and soon. We cannot wait until the next Congress in February because three months from now the collapse of spending, consumption and investments will be so sharp that the economic contractions could become even more severe," he said.
Richard Vedder, Professor of Economics at Ohio University and a visiting scholar at the American Enterprise Institute is concerned that an overly-zealous Congress, as he puts it, will craft legislation that could have adverse effects and questions where the money will come from. "In a financially-stressed situation, we're talking about going out and borrowing to add 300 or 400 billion on to what we are already doing, the better part of at trillion dollars, seven or eight percent of GDP. I think that is a dangerous and somewhat fiscally irresponsible thing to do and I think in the long-run it will inspire a decline in confidence and will lead to inflationary expectations soaring."
Former International Monetary Fund research director Simon Johnson, now with the Massachusetts Institute of Technology, warns of unprecedented global dimensions from a U.S. recession.
He urges Congress to act quickly on a package of around 450-billion dollars, to include extending unemployment benefits, job re-training, student and small business loans, and infrastructure projects. "I think we probably have a month or perhaps two months to really see the direction of the economy. I would agree completely with people who think that now is the time to prepare a large fiscal stimulus."
In the House Ways & Means Committee, state governors, a city mayor, and state and local officials called for another government stimulus plan.
New York Governor David Paterson said his state is among 25 U.S. states facing huge deficits. "There are 25 states in deficit, totaling more than $48 billion of debt. Their projections for 2010 are spiked upward incredibly. There will be 39 states in deficit and the amounts owed total over $105 billion."
Among more dire warnings, Robert Greenstein, of the Center on Budget and Policy Priorities, spoke of potential sharp increases in poverty, with Americans facing what he calls holes in the social safety that did not exist during previous deep recessions in the 1970's and 1980's: "I think we are facing a growing prospect of levels of destitution, not just poverty, destitution, severe hardship and increases in homelessness that we haven't seen in several decades," he said.
Democratic Representative Charlie Rangel, chairman of the Ways & Means panel, says Democrats and Republicans should work together when Congress returns after the election to help with the economy. "We have to be prepared to put together that will indeed be bipartisan. Quite frankly I don't think that should be very difficult. When someone loses their job, their health insurance, can't pay the mortgage, finds himself not being able to get credit, no one asks whether they are a Republican or whether they are Democrat."
Republicans such as Representative Jim McRery share concerns about the widespread impacts of recession, but oppose any package that would have little chance of winning congressional and presidential approval. "It would do us little good to draft a package like that if it stands little chance of passing a closely-divided Senate or getting signed by the president," he said.
The White House has so far expressed resistance, at least in public, to any new measure containing the kind of provisions and level of spending Democrats are likely to include.
This means Democrats would have to wait until next year and a new congressional session, to work with either Senator Barack Obama or Senator John McCain as president, on the next stage of efforts to help the economy.