Prices prompt talk of stimulus
Aid would target poor, middle class
WASHINGTON – America’s economy got another jolt of frightening news Wednesday as consumer prices logged their second biggest monthly jump in 26 years.
And although the stock market was up and oil prices were down, policymakers’ concern heightened as congressional Democrats began seriously considering a new economic stimulus package.
House Speaker Nancy Pelosi, D-Calif., said she aimed to craft a plan that would target “those most in need, middle-income families and those who aspire to the middle class.”
Under discussion was more money for infrastructure repairs, for food stamps, for state Medicaid programs and energy aid for low-income people. Some also are talking about tax rebates.
Republicans, including President Bush, said they were in no rush to offer another stimulus, and economists weren’t keen on the idea.
“Let’s get through the existing crisis first, dealing with the housing situation,” said House Republican Conference Chairman Adam Putnam, R-Fla.
Federal Reserve Board Chairman Ben Bernanke also urged caution.
“Given the high degree of uncertainty, monetary policymakers will need to carefully assess incoming information bearing on the outlook for both inflation and growth,” Bernanke told the House Financial Services Committee on Wednesday.
More ominously, he added: “There’s no single solution. If there were, of course, we would have used it by now.”
Concern about the economy has muscled aside almost every other political issue. A new Associated Press-Ipsos poll, taken last Thursday through Monday, found that 77 percent of those surveyed thought the nation was on the wrong track; 16 percent said it was on the right track.
The Conference Board, a New York-based research firm that tracks consumer sentiment, found last month that consumer confidence was among the lowest ever recorded.
Policymakers stepped up efforts to find ways to ease the wider economic pain.
The year’s first stimulus appears to have had only a minimal effect. A survey late last month of 3,004 people nationwide who get financial counseling found that 29.4 percent used their rebate checks to pay for “everyday expenses” such as food and gasoline. Another 20 percent paid down credit card debt.
“The check helped them get by another month,” said Scott Scredon, a spokesman for the Consumer Credit Counseling Service of Greater Atlanta, a nationwide firm that conducted the survey.
Economists didn’t see the rebates giving the economy a significant boost, and didn’t see much prospect for a second round of checks or aid doing much more.
“The first check may have had a small, one-time effect,” said Muhammad Islam, an associate professor of economics at St. Louis University. “But the real problems are concentrated in the finance and energy sectors, and those aren’t going to go away for a while.”
A second rebate check is on the Democrats’ list of possible stimulants this year.
Presumptive presidential nominee Barack Obama backs a $50 billion plan that includes helping consumers pay energy bills and deal with possible housing foreclosures and providing states with fiscal relief.
Pelosi convened an economic meeting Tuesday at which lawmakers and economists generally sympathetic to Democrats made the case for more stimuli.