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.
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye