Bernanke: Juice the economy 'quickly'

by Paul R. La Monica, CNN Money: Federal Reserve Chairman Ben Bernanke told Congress Thursday that legislators should enact a fiscal stimulus package in order to help beleaguered consumers as recession fears grow. . . . To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next twelve months or so," Bernanke said. . . . Bernanke said that current losses from the subprime mortgage mess were probably about $100 billion but cautioned that this figure could wind up being higher.

Former Treasury Secretary Larry Summers told lawmakers on Tuesday that Congress should consider a stimulus package of up to $150 billion. He proposed an immediate injection of $50 billion to $75 billion through a combination of tax cuts and increased spending on unemployment benefits and other programs. He also advocated that another $50 billion to $75 billion be set aside in case economic conditions weaken further.

During Thursday's hearing, Bernanke said he thought a fiscal stimulus package of up to $150 billion, would be "reasonable." A spokesman for President Bush said Thursday that the White House also supports a short-term stimulus package. Bernanke cautioned though that any stimulus "should be explicitly temporary" in order "to avoid unwanted stimulus beyond the near-term horizon and, importantly, to preclude an increase in the federal government's structural budget deficit." The Fed chairman said that extending some of the tax cuts engineered by Bush in 2001 and 2003, which are set to expire in 2010, could have a positive impact on the stock market today. He singled out the cut on dividend taxes as particularly key to stimulating the economy.

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