Congressional leaders and both President Bush and President-elect Obama have stressed the need for another financial stimulus package to jump-start the stalled economy. Economists weigh in on what steps they would take.
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Jump-starting a deeply battered economy is clearly on the table now for the incoming president and Congress. The question is, how best to do it?
We're joined by two economists who served past presidents and advised the candidates in this campaign.
Alan Blinder of Princeton, a former vice chairman of the Federal Reserve Board, he served as an economic adviser to President Clinton and recently to Senator Obama.
And Martin Feldstein of Harvard, he served as chairman of the Council of Economic Advisers under President Reagan and advised Senator McCain.
Well, Alan Blinder, why is a fiscal stimulus package needed? And what should be in it?
ALAN BLINDER, Princeton University:
It's needed because the economy's sagging badly. It's not at all performing the way it should. We're certainly in a recession. And the question at this point is, how long and how deep is that recession going to last?
And that last remark is the — holds the answer to your other question. You need to do two things in this package.
You need to boost spending in the economy. It almost doesn't matter what kind of spending, but we'd like it not to be wasteful spending, something that's valuable in its own right.
And, secondly, you've got to do the kind of support for people that are going to be losing their jobs, losing their homes, losing their health care benefits, and a whole variety of other things that come with job displacement, because there's going to be a lot of it.
Martin Feldstein, let me ask you the same question. As a general proposition, what would you like to see in a plan?
MARTIN FELDSTEIN, Harvard University:
Well, I think Alan Blinder was right on. I think the plan has to be big, it has to be quick, and it has to be focused on creating employment.
So the kinds of things that I read about that Congress is thinking about, $100 billion, that doesn't begin to do the job. A talk about a tax rebate, well, we tried that earlier this year, but it ended up doing very little for spending and job creation. Most of that money just got saved or used to pay down debts.
So it's very important that this be focused on things that will create production and employment in the short run quickly.