Bernanke: Time To Consider Stimulus

NEW YORK ( -- Federal Reserve Chairman Ben Bernanke testified Monday that Congress should consider passing a new stimulus package to try to jump start the economy.

Bernanke, speaking before the House Budget Committee, came just short of an outright endorsement of a package to pump tax dollars into the economy.

"With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," he said.

Bernanke, who with Treasury Secretary Henry Paulson has led the government's extraordinary efforts in recent weeks to stem the financial crisis, was asked by Rep. Rosa DeLauro, D-Conn., whether the economy is in a recession.

"We are in a serious slowdown," Bernanke said, refusing to give the yes-or-no answer DeLauro said she wanted.

He said "recession" is a technical description of economic conditions. "Whether it's called a recession or not is of no consequence," Bernanke said.

Most of Bernanke's nearly 90-minute appearance focused on economic stimulus. He said that Congress should consider another measure but nonetheless declined to say how much money should be spent. He said that's a decision for Congress, not the Federal Reserve.

Earlier this year, Congress approved a stimulus plan that sent nearly $100 billion to most tax filers in the form of payments of at least $600, or $1,200 for joint filers. Other tax break for businesses brought the cost of the entire package to close to $170 billion.

Bernanke suggested Monday that any stimulus program should be activated as quickly as possible to boost the economy when it is facing its greatest period of weakness.

In addition, Congress should weigh whether to make credit more available to consumers, homeowners, businesses and other borrowers, Bernanke said. He said that loan guarantees and direct lending by government are among the ways lawmakers can get credit flowing again.

Democrats have been pushing for a second stimulus package for months. Among the proposals they've put forward: extend jobless benefits, increase food stamps, invest in infrastructure projects and impose a requirement for a foreclosure moratorium.

Republicans have made their own proposals, which focus more on tax breaks than direct payments. Among them, reduce or suspend the capital gains tax and offer a bigger tax break for home buyers.

The presidential candidates, whose crisis-related stimulus plans largely differ from one another, nevertheless both call for suspending the income tax on unemployment benefits and temporarily exempting seniors over 70-1/2 from having to make withdrawals from their IRAs and 401(k)s.

At Monday's hearing, Rep. Brian Baird, D-Wash, pushed Bernanke about the value of spending on infrastructure projects, such as roads and water projects. Such projects have economic value, but it generally takes a long time for spending on such projects to get into the system, Bernanke said. Baird responded that in his district and across the country there are many projects ready to go and lacking only funding.

Lawmakers also questioned Bernanke about the need to help state and local governments avoid budget cuts. The federal government could loan states money at significantly lower rates than available in the financial markets, Bernanke said. To top of page