| Because as we all know, you can always spend your way into more prosperity ... |
House Speaker Nancy Pelosi is mulling recommendations from several economists that Congress act on an economic-recovery package that would cost taxpayers $300 billion, according to congressional aides, equivalent to about 2% of the country's gross domestic product.The California Democrat envisions a bill that would include new spending on highways and bridges, extended benefits to unemployed workers, aid to cash-strapped states and a tax cut, congressional aides said. She has asked several House committees to examine details of a possible plan. And as part of the effort, Federal Reserve Chairman Ben Bernanke is expected to testify next week before the House Budget Committee on the state of the economy. Ms. Pelosi is expected to call lawmakers back to Washington in late November to take up the issue.
With the Nov. 4 election less than three weeks away, lawmakers are eager to respond to voter concerns about the economy. The chances of a new stimulus package being enacted are likely to depend on what happens in the election and what happens to the economy. The White House and its Republican allies in Congress so far have resisted a spending-focused stimulus package.
John Boehner
House Minority Leader John Boehner (R., Ohio) described the latest Democratic package as a "big government boondoggle."
Democratic lawmakers are also seeking to rewrite the rules on how housing purchases are financed, and to redefine the roles of mortgage giants Fannie Mae and Freddie Mac.
The lawmakers are also looking to tighten regulation of financial services, with hedge funds, private-equity funds and exotic financial instruments such as credit-default swaps likely to come under greater federal scrutiny. "There is no question in my mind that we must adopt a stronger system of regulation and oversight for these swaps and derivatives and everything else that's out there," Senate Agriculture Chairman Tom Harkin said on Tuesday. "We've got to have regulations to protect our economy from these excesses."
The Iowa Democrat's committee oversees commodity trading.
House Financial Services Chairman Barney Frank said the Bush administration's decision to invest directly in banks is a turning point in the debate over regulation. "It has definitely changed Washington, very dramatically," the Massachusetts Democrat said. "Two years ago, the prevailing opinion was [that] we needed to deregulate further. Now, the argument is [over] what kind of new regulation we need."
Rep. Frank plans to convene a hearing next week to explore how to strengthen oversight of financial markets. Committee aides are expected to focus on developing legislative recommendations the rest of the year; that would set the stage for action on a sweeping bill early in 2009, when the new Congress is seated.
"This is equivalent to what FDR had to do...to save capitalism from its own excesses," Rep. Frank said, referring to measures taken by President Franklin D. Roosevelt to calm markets and protect investors during the Great Depression.
Rep. Frank predicted that any legislation aimed at toughening oversight would face little opposition in Congress, especially after lawmakers have effectively exposed taxpayers to hundreds of billions of dollars in potential new liabilities. "We're beyond the point where anybody will stand up and try to block this," he said.
Lawmakers have reacted cautiously to the Bush administration's plan to buy stakes in nine major banks. Sen. Judd Gregg (R., N.H.) said the actions by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. "will help us avoid what could potentially be a catastrophic economic meltdown."
Speaker Pelosi portrayed the coordinated efforts as "steps in the right direction that could help to restore confidence in our financial markets."