Stimulus Chatter Still Short on Details

The Bush administration threw its support behind an economic-stimulus package to help consumers and businesses cope with the slowing economy, though its ultimate success will hinge on its size and structure.

Democrats had been pushing for a second such plan to pump funds into the real economy, though a $61 billion economic aid plan was blocked by Senate Republicans last month, and President Bush had already threatened a veto.

The tone changed markedly on Monday, as Federal Reserve Chairman Ben Bernanke told the House budget committee that a stimulus package would be "appropriate" to deal with the headwinds facing consumers and businesses. While he refused to offer advice on the dollar amount, Bernanke said the package should be "significant."

White House press secretary Dana Perino said later in the day that President Bush is "open to ideas that [Congress] would put forward ... that would stimulate the economy and help us pull out of this downturn faster," according to the Associated Press.

House Speaker Nancy Pelosi (D-Calif.) has said that Congress will hold hearings next month to determine the exact size of the plan, but suggested that funds could potentially go toward infrastructure, states that have seen a sharp economic decline, additional unemployment benefits and rebates or tax cuts to help support consumer spending.

Bernanke said the funds ought to be "well-targeted," in areas that will push forward a so-called knowledge-based economy. He mentioned education, research and development, technology, energy and science as potential areas, as well as basic infrastructure, in which the Roosevelt administration invested heavily to bring the country out of the Great Depression.

The government has distributed $168 billion worth of direct-to-consumer stimulus payments this year, though it has been deemed a failure in its effort to spur spending. Only between 10% and 20% of the rebates were actually spent, as wary shoppers hoarded most of the cash or spent it on essential items, as food and energy prices skyrocketed over the summer.

Martin Feldstein, a leading economist at Harvard who first supported the package, said that "optimism was unwarranted" in a Wall Street Journal opinion piece whose headline called the earlier program a "flop."

"I still believe that the evidence shows that a one-time rebate-type package is not effective," says Feldstein. "Whether some spending program will have a 'real impact' will depend on how big the package is."