Thursday, January 8, 2009

Without Large-Scale Recovery Package, Economy Could Shut Down, Economists Tell Lawmakers

/PRNewswire-USNewswire/ -- A large scale economic recovery package is needed to create jobs quickly, provide relief for workers and families, help states facing severe budget shortfalls, and invest in innovation and emerging industries, a bipartisan panel of economic experts and scientists told lawmakers on Capitol Hill January 7. Economists warned that, unless comprehensive action is taken, the economy will shed another 3 million jobs in 2009, real Gross Domestic Product could drop by $750 billion, and the unemployment rate will top 10 percent.

The Democratic Steering and Policy Committee, along with House committee chairs, convened the forum in the first days of the 111th Congress to brief lawmakers on the latest economic outlook and components that should be included in the upcoming economic recovery package.

"We must pass an economic recovery and jobs package no later than mid-February, in my view," said House Speaker Nancy Pelosi (D-CA). "This forum will demonstrate to the American public the need for this job and economic recovery package. We look forward working in the days ahead with our President-elect so we have legislation before we observe President's Day this year."

"Economists across the board agree that innovative strategies to create jobs and invest in our future are the only way to revive and grow our economy - and that workers and families can't afford to wait," said U.S. Rep. George Miller (D-CA), the co-chair of the Democratic Steering and Policy Committee and the chairman of the House Education and Labor Committee. "If we act swiftly and make wise decisions, we can tackle many challenges at once: rebuilding our economy and the middle class, improving our infrastructure and energy-independence, and regaining the competitive edge that will fuel discovery and opportunity for generations to come."

"We are holding this extraordinary hearing because of extraordinary times; indeed, we are convening as the economy falls deeper into crisis. We are shedding jobs at a staggering rate, retirement accounts are draining, the housing market has collapsed, the financial market is in turmoil, and the credit markets are nearly frozen. A crisis requires more than the band-aid of past efforts, but rather, we must act boldly to get our economy back to sustained job and income growth," said Congresswoman Rosa DeLauro (CT-3), the co-chair of the Democratic Steering and Policy Committee. "This forum today brought together a broad spectrum of economists and scientists who agree that we need to move quickly with a significant economic recovery package."

"This economy is shutting down," said Dr. Mark M. Zandi, the chief economist and cofounder of Moody's, who predicted that the economy stands to lose 500,000 jobs a month for the foreseeable future. While both spending and tax cuts should be including in a package, spending provides a higher rate of return than tax cuts. Each dollar spent yields a return of $1.50 in economic growth; while each dollar in tax cuts yields $1 return.

"In my view, the goals of the economic recovery plan should be to strengthen traditional safety nets; increase purchasing power, especially among the bottom half; create as many new jobs as quickly as possible; get the long-term unemployed and the poor into many of those jobs," said Robert B. Reich, a Secretary of Labor under the Clinton administration and a professor at the University of California at Berkeley, who estimated that a stimulus of at least $900 billion over two years is needed. "The danger is not that the federal government will do too much but, rather, that it will do too little."

"While fixing the credit markets is necessary for sustained economic growth, it will not bring the economy back to full employment," explained Martin Feldstein, a professor of economics at Harvard University and the chief economic advisor to former President Ronald Reagan. "Because monetary policy is not effective, reviving the economy requires a major fiscal stimulus from tax cuts and increased government spending."

The panelists agreed that both immediate and long-term strategies are needed to jump-start the economy and spur long-term growth.

"We need to secure our overall competitiveness, otherwise we could create new jobs now only to lose them to foreign competition later," said Norman R. Augustine, the chair of National Academies' Rising Above the Gathering Storm report committee.

"What are most needed are elements that create real, sustained growth in the economy. We need to bolster existing high-growth innovation areas, and we will need to create new areas," said Maria T. Zuber, a professor of geophysics at the Massachusetts Institute of Technology. "One path ahead is clear: the country is at the cusp of a revolution in energy science and technology."

Overall, the panel's recommendations included:

-- Providing aid to states and local governments to maintain jobs and
vital aid programs;
-- Expanding unemployment insurance and extending jobless benefits;
-- Investing in existing, shovel-ready infrastructure projects, including
highways, roads, bridges, schools, levees, water and sewage systems,
and the electricity grid to get Americans back to work quickly and
-- Investing in science, technology and other emerging industries to
support research and drive innovation and sustainable growth;
-- Creating a green economy by investing in energy-independence and
building a "green" jobs corps;
-- Providing tax cuts for lower- and middle-income families to increase
purchasing power;
-- Improving job training programs and support for unemployed and lower-
workers; and
-- Ensuring that economic recovery package is transparent and accountable
to the American public.

The forum built on committee hearings held during the 110th Congress to examine the need for an economic stimulus plan. The chairs of those committees, including the chairmen of the Science and Technology, Budget, Energy and Commerce, Ways and Means, Education and Labor, Appropriations and Transportation and Infrastructure Committees, all participated in today's forum.

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