Bernanke Tells Congress Second Stimulus Would Be "Appropriate"

October 20, 2008 1:12 p.m. EST

Washington, D.C. (AHN) - Testifying before the House Budget Committee on Monday, Federal Reserve Chairman Ben Bernanke expressed support for a second economic stimulus package but cautioned that it would involve trade-offs. He also refused to say whether the nation was in recession.

"Any fiscal action inevitably involves tradeoffs... Moreover, with the outlook exceptionally uncertain, the optimal timing, scale, and composition of any fiscal package are unclear," Bernanke said in his opening statement before the panel. "All that being said, with the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate."

"Any program should be designed, to the extent possible, to limit longer-term effects on the federal government's structural budget deficit... If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, homebuyers, businesses, and other borrowers. Such actions might be particularly effective at promoting economic growth and job creation," he added.

Bernanke also declined to answer questions whether the economy was in recession, telling lawmakers it "doesn't matter" since the term "recession" was simply a technical term used by economic historians, according to MarketWatch. "We are in a severe slowdown, with severe consequences," he said.

The Fed chief's statement comes despite the president's top economic adviser, Council of Economic Advisers chairman Edward Lazear, telling CNN on Sunday, "We are seeing what anyone would characterize as a recession in some parts of the country."

Congressional Democrats have been pushing for a second stimulus since last month. Congress passed a $168 billion stimulus package in February that allowed the government to give tax breaks to companies and send rebate checks worth $300 to individuals and $1,200 to every family.

Democrats heightened their calls for a $50 billion second economic stimulus package in September as financial crisis deepened with the disappearance of two of the nation's largest investment banks, Lehman Brothers and Merrill Lynch. They were able to pass a $61 million stimulus package in the House but were blocked in the Senate.

House Speaker Nancy Pelosi (D-CA) earlier this month called for a second stimulus plan worth $150 billion, but last week she said after a Democratic economic forum that the cost of the package would be decided over the next month.

House Minority Leader John Boehner (R-OH) has called Pelosi's $150 billion proposal "irresponsible" and proposed an alternative approach that he said would encourage economic growth and job creation through tax relief and increased energy production.

House Minority Whip Roy Blunt (R-MO) has told ABC he is willing to support a second economic stimulus package, but only if it does not give Democrats "an excuse" to allow more spending for public works.