WASHINGTON — Congress is developing several stimulus proposals to jump-start a faltering economy, as indicators point to a severe downturn and possible recession and consumers tighten their spending.
The precarious state of the economy is also shaping the presidential race and candidates have rushed to address the problem with plans of their own.
House Speaker Nancy Pelosi (D., Calif.) said Wednesday that Democratic leaders will work with the Republican leadership and the Bush administration to craft a bipartisan package of economic incentives, possibly as early as next week.
"It has been clear for the past few weeks that in all sectors in the economic world, all shades of opinion in the economic world have said to us that a stimulus is needed to avoid a downturn or let [the economy] worsen," Pelosi said at a press conference in the Capitol. "Our [goal] is to put forth a stimulus package that will be timely, will be temporary and will be targeted to middle- and lower-class families. We need to work in a bipartisan way to instill confidence in America's consumers and to restore confidence in our markets."
Pelosi revealed few details of the plan that she and other lawmakers are shaping, but she pointed to a report released by the Congressional Budget Office on Tuesday as a reference point for "some guidance" on successful initiatives.
The CBO, a nonpartisan agency that provides economic analysis to Congress, said several proposals supported by Democrats, including tax rebates, a temporary increase in food stamps and extended unemployment benefits, are cost-effective and boost the economy in the short term. The agency said tax rebates ranging from $300 to $600 given to taxpayers in 2001 were an effective way for Congress to ignite the economy, cautioning the rebates were most effective when given to middle- and lower-income families who are more likely to spend it.
The economy has also taken over the debates in early presidential primary states. Democratic candidates have all pledged to end the across-the-board tax cuts President Bush implemented in 2001 and 2003. Those tax cuts expire at the end of 2010.
The Republican candidates, with the exception of former Arkansas Gov. Mike Huckabee, who is promising a national sales tax and elimination of income taxes, have said they would make the tax cuts permanent.The weak showing of consumer spending, which makes up two-thirds of the economy, has stoked fears among merchants. The National Retail Federation's board adopted a resolution on Tuesday calling on Congress and President Bush to quickly enact a plan that "would put cash back in consumers' pockets."
The mass merchant-oriented Retail Industry Leaders Association also supports a stimulus package.
Katherine Lugar, senior vice president of government affairs for RILA, said, "There is no question putting money back in the hands of consumers is both beneficial to the retail industry, but more importantly, to the overall economy."
Economists were divided over whether a stimulus package will stave off a recession.
Rajeev Dhawan, director of the economic forecasting unit at Georgia State University, said tax rebates might help in the short term, if enacted quickly, but would not help in the long run.
"At this point, Congress needs to think more about homeowners and how they can help them, rather than doing an overall tax cut or rebate," Dhawan said. "The root of the problem is that people cannot refinance their subprime mortgages and tax rebates will not help that."
Brian Bethune, a U.S. economist for Global Insight, said tax rebates are the right answer for the economy, if delivered in a timely manner without conditions and coupled with further interest rate cuts. Bethune said Democrats will run into trouble by proposing "targeted" tax refunds and should focus instead on across-the-board refunds.
On Wall Street, retail shares rallied after the Federal Reserve said there was economic growth at the end of 2007.
The S&P Retail Index was up 2.5 percent to close at 374.05, one of the first times the index has closed up since the start of trading in 2008. The Dow Jones Industrial Average fell 0.3 percent to 12,465.51, while the broader S&P 500 was down 0.6 percent to 1,373.04.
Christopher & Banks Corp. rebounded 13.9 percent to $9.73, after being downgraded by Northland Securities on Tuesday. Department stores also had a big comeback. Sears Holding Corp. rose 4.9 percent to $90.25, while Macy's Inc. increased 3.9 percent to $22.49. J.C. Penney Co. Inc. recovered 6.5 percent to close at $39.22 and Gottschalks Inc. grew 7.2 percent to $2.39. Stein Mart Inc. was one of the biggest advancers, soaring 12.3 percent to $4.28. High-end department store Saks Inc. jumped 6.2 percent to $16.02.But a Reuters/Zogby poll showed consumers fear a recession more than ever. The index, which measures the mood of the country, fell from 97.3 to 94.2, its lowest since the survey started in July. A score above 100 indicates the public mood has improved since July, while a score below shows the mood has worsened. Concerns about the slowdown in the housing market and increasing food and energy prices caused 43.4 percent of voters to say they expect a recession, up from 40 percent last month.
Exclusive: Nicola Formichetti is parting ways with @diesel after nearly four years. Formichetti, who served as Lady Gaga’s stylist in 2009, joined Diesel in 2013 as creative and artistic director. His first show debuted in Venice with a show held at the Venetian Arsenal. #wwdfashion #wwdnews
The polo shirt - an icon of preppy style - is roaring back into fashion in many creative guises, like this A-line polyester top from @carven, worn with @31philliplim cotton and elastane pants. Designers stretched a fashion classic into all kinds of new permutations this season. See how @mayteallende styled the preppy trend on WWD.com #wwdfashion (📸 : Kinya)
(Market Editors: @andrew_shang and @elmercer, Makeup: @amandawilsonmakeup using @fentybeauty, Hair: @gonn24, Model: @bara_holotova at @women360mgmt)
“I do like period [projects] a lot because I like creating those worlds, a world that is different from today," costume designer Mark Bridges said about the '50s British couture featured in @phantomthread. Bridges created the overall aesthetic and individual fashion looks for the film, which stars Daniel Day-Lewis, Lesley Manville and Vicky Krieps. Pictured here is a gown he designed for Krieps who plays Alma – the love interest of Day-Lewis' character, Reynolds Woodcock. #wwdfashion
@prada is embracing the holiday season with a series of short movies about the art of gift-giving. "The Postman's Gifts", which was directed by American filmmaker Autumn de Wilde, focuses on the brand's signature Prada Galleria bag and features Elijah Wood as the postman. In the first two episodes, Wood's delivers the iconic bag to @emmaroberts, who plays herself as a movie star, and Sasha Frolova. #wwdfashion
“I think I never met the person while we were working,” Vicky Krieps said of Daniel Day-Lewis, who she plays the love interest of in “Phantom Thread.” Day-Lewis remained perennially in character, so much so that she feels she’s just meeting him now. “It’s interesting to see how different he is in real life to the character,” Krieps said. WWD sat down with the 34-year-old actress to talk about her new role in the period film, which brings the fifties’ gender dynamics into the mix. Read more on WWD.com. #wwdeye (📷: @lexieblacklock)
@gucci has expanded its “Places” project to include six new cities. The initiative, which was first unveiled in July, aims to invite people to explore inspirational locations for the brand. On the list is the Biblioteca Angelica library in Rome pictured here. See the other five new venues on WWD.com. #wwdfashion (📷: @massimo_listri_official)
#ad From tools to lashes, WWD rounded up wellness and beauty products guaranteed to take your skin care and makeup routines to the next level in 2018. Follow along as @laceandleatherbyelyse, @ashnfashn and @elleisalwayshere experiment with these products on their Instagram profiles and blogs. #NewYearBetterYou
Blogger @camilacoelho is one of the fastest growing beauty influencers around the world. The bilingual blogger has worked with brands like @revolve Beauty, @dior, @louisvuitton and more and has an Earned Media Value of $34,338,441, according to @tribedynamics. But Coelho isn’t the only influencer making a major impact — head to WWD.com to see the other fastest-growing influencers in six key global markets. #beautyfridays (📷: @zefashioninsider)