Bush and Bernanke back plan to stimulate economy

WASHINGTON – President Bush and Federal Reserve Chairman Ben Bernanke on Thursday embraced calls for an economic stimulus package to avert recession. Bernanke said such a plan should be aimed at quickly getting cash into the hands of people, especially those with low and moderate incomes.\nThe Fed chief, in testimony to the House Budget Committee, said efforts that involve “putting money into the hands of households and firms that would spend it in the near term” would be more effective than other provisions, such as making Bush’s tax cut permanent. “Again, I’m not taking a view one way or the other on the desirability of those long-term tax cuts being made permanent,” he said.\nWhile shying away from endorsing a specific plan, Bernanke made clear his support for the general concept of an economic rescue package and that it be temporary that it won’t complicate longer-term fiscal challenges. It is likely that any such package would include tax rebates.\n“Fiscal action could be helpful in principle” and may provide “broader support for the economy” than the Fed can furnish alone through reductions in interest rates, Bernanke said. However, “the design and implementation of the fiscal program are critically important,” he said.\nBernanke forecast slower growth in 2008 but not a recession.\nWhen asked by lawmakers about the potential effect of a fiscal stimulus package totaling around $100 billion, Bernanke said the economic impact could be “significant” and not “window dressing.” Some have floated packages that would range in size from $50 billion to $150 billion – all of which are in the range of “reasonable,” Bernanke said.\nRebates can be useful, he added.\n“Getting money to low- and moderate-income people is good in the sense of getting a bang for the buck” because they tend to spend it quickly, Bernanke said. Research shows that the affluent spend some of their rebates, he said.\nTemporary expensing and depreciation provisions for businesses also could spur spending, which would help the economy, he said. As it puts together a package, Bernanke added, “Congress might want to consider a diversified mix of elements.”\nBut he warned: “I hope Congress can resist having a huge list of things” that would lard up legislation and might not do much to help bolser the economy in the short run.\nAt the White House, spokesman Tony Fratto said, “The president does believe that over the short term, that to deal with this softening in the economy, that some boost is necessary.” That marked the first White House confirmation that Bush, confronting a deepening economic crisis that has shaken much of the nation, supports government intervention. Until now, the White House said the president was just considering some type of short-term boost.\n“We do want to try to pass something quickly,” Fratto said later in the day. “I see no obstacle to that. It seems to me that both sides of the aisle in both houses of Congress want to try to get to an agreement,” he said.\nFratto would not divulge the details or what the stimulus would look like, other than to say all options are being considered.\nThe shaping of a stimulus package was expected to accelerate Thursday during a conference call between Bush and congressional leaders. “I would characterize it as a consultation,” Fratto said.\nFratto declined to say when the president could announce a package, or whether it would be before or after the State of the Union address later this month.\nThe fragile state of the economy has gripped Wall Street and Main Street and is a rising concern among voters. The situation has galvanized politicians – \nincluding those vying to be the next president – and poses the biggest test to Bernanke, who took over the Fed nearly two years ago.