Economists: Stimulus Package Needed Now

by James Parks, Feb 4, 2009

The nation’s economy is in a free fall without a parachute, and Congress needs to act quickly to pass President Obama’s recovery package to begin to reverse the economic spiral, three prominent economists said.

During a press conference today, the economists made it clear that Congress should get over its partisan wrangling and pass a bill that increases spending and puts Americans back to work. Americans United for Change and the Economic Policy Institute (EPI) hosted the press conference call.

(Click here to urge your senators to support the president’s economic recovery package.)

Princeton University Professor Alan Blinder, a former member of the White House Council of Economic Advisers and the Federal Reserve Board, told reporters the stimulus package is urgently needed and that any talk of not passing it could be disastrous.

It would be a tragedy if the stimulus package doesn’t pass. It would be an act of extreme national stupidity not to enact a big stimulus bill, and the sooner the better.

The need for the stimulus is clear in the nation’s unemployment figures, says EPI President Lawrence Mishel:

Eighteen to 19 percent of workers are unemployed or underemployed. And it’s far worse for African Americans, who are 18 percent unemployed and 30 percent underemployed. All that means is lower wages and less income for everyone.

The stimulus package will generate spending and create jobs, Mishel added, through a combination of tax cuts and public investments, especially such projects as infrastructure repair that put money in the pockets of the middle class who will spend it. He warned against increasing business tax breaks because, he said, they don’t really generate much spending or create jobs.

Lawrence Chimerine, former CEO of the WEFA Group, an economic forecasting firm, and Chase Econometrics, said Republican plans to limit tax breaks to the rich will not work.

We’ve never had a recession this large before and as broad-based. Fear is widespread and confidence is very low. This is an emergency. This is a national crisis. We need a large stimulus package that has a large component of spending. It has tax cuts that are going to generate big bang for the buck such as making sure that people who pay Social Security taxes get a tax cut. The House Republicans only wanted to give a tax cut to people who pay income tax, which would leave out about 35 percent of American families who need it the most and would spend it shortly.

Blinder added that the Obama plan is a start on turning the economy around, and after it is passed, the government must pay attention to new measures to keep the financial system afloat, reduce the tidal wave of foreclosures and mend the credit markets.

But no matter how you cut it, Mishel says:

What (Congress) is talking about is sizable. It’s definitely not too large. And it needs to be done now. If it’s not, the American people should hold the politicians accountable for the severity of the recession they’re going to be experiencing.

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