Democrats listen to stimulus proposal

January 7, 2009 8:17:57 PM PST
It looks like Congress is going to increase the debt by spending hundreds of billions more on another stimulus package. An economic forum was held on Wednesday on Capitol Hill.

It was a Democratic affair with Speaker Nancy Pelosi wanting to make sure Democratic lawmakers are ready to move on the next stimulus package as soon as Barack Obama becomes President.

Concord Congressman George Miller (D) chaired the economic forum.

"It is vital that in the first days of this Congress members be briefed on the latest developments in our economy," said Miller.

Among the experts testifying is former Labor Secretary and current U.C. Berkeley professor Robert Reich.

"Since the bursting of the housing bubble, the fact of the matter is consumers have not had the money they need," said Reich.

Reich told the panel as the country's economy continues to spiral downward, consumers aren't spending as much so businesses aren't producing as much. That has resulted in layoffs mean consumers have even less money.

"And that vicious cycle can only be remedied, it can only be turned around, by concerted government action. Government is the spender of last resort," said Reich.

An economic advisor to President-elect Barack Obama, Reich believes the government needs to spend $900 billion over the next two years. Even a couple of John McCain's economic advisors advocated spending.

"It should be directed more towards spending than tax cuts. Spending has a much larger economic bang for the buck," said Mark Zandi Chief economist and co-founder of Moody's

Zandi told the Democrats every $1 the government spends to on infrastructure, results in a $1.50 increase in gross domestic product or GDP. While a $1 in tax cuts results in just a $1 increase in the nation's earnings.

"So it's much more efficient to provide stimulus through spending than tax cuts," said Zandi.

Speaker of the House Nancy Pelosi said Congress must pass a job package by mid-February.

"A failure to act quickly can only lead to more job losses and more economic pain for Americans," said Speaker Pelosi.

But spending over tax cuts will be a tougher sell with Republican lawmakers.

"It's more spending and more debt and I don't think it'll solve the problem," said Texas Republican Congressman Ron Paul (R) of Lake Jackson, Texas.

Harvard professor Martin Feldstein, President Regan's chief economic advisor, was another Republican testifying at Wednesday's forum. And like Reich and Zandi he too advocated a big spending package, but he added. Congress must make sure it doesn't get used to it. In his words, "There needs to be an exit strategy."