WASHINGTON (Reuters) – Federal Reserve Chairman Ben Bernanke on Thursday threw his weight behind proposals for near-term actions to stimulate economic growth to ward off an election-year recession — but warned such a plan could do more harm than good unless put together quickly.
So, if it wasn’t an election year, a recession would be okay?
A sense of urgency has set in at the White House and among lawmakers on Capitol Hill about how to prop up an economy that some analysts say may have already fallen into a recession.
The White Houses confirmed it was working on a stimulus plan, and President George W. Bush talked with congressional leaders later on Thursday about measures that might be in it.
The idea of a quick fiscal stimulus package has taken flight in the past two weeks as rapid-fire reports showed U.S. unemployment hit a two-year high in December, while retail sales fell and manufacturing activity stalled.
Lawmakers are considering a package that could extend tax rebates of about $250 to $600 each to individuals and give businesses a bigger tax break on new investments.
Of course, no relief for those people who don’t earn enough to even file for income tax.
Bernanke repeated a bleak assessment of the economy’s health that he made in a speech last week. “Recently, incoming information has suggested that the baseline outlook for real activity in 2008 has worsened and that the downside risks to growth have become more pronounced,” he warned.
U.S. stock prices dropped sharply as the factory gauge and news of a big loss at brokerage Merrill Lynch […] deepened economic fears. The Dow Jones industrial average .DJI ended the day down 307 points, or 2.5 percent. The dollar dipped on the factory survey and Bernanke’s testimony, while the yields on U.S. government debt fell sharply.
Bernanke noted that financial markets around the world have been under strain since late last summer, largely because of problems in the U.S. subprime mortgage market, where foreclosures have been rising sharply.
He said losses in the subprime market may have reached $100 billion so far and would likely climb, but would not top $500 billion.