By Barbara Hagenbaugh
WASHINGTON -- Congress should pass a second economic stimulus bill that could include tax cuts, an extension of unemployment benefits, or funds for roads and bridges, say a majority of economists polled recently by USA TODAY.
The advice to lawmakers comes as many of those economists say the USA is in a recession that is likely to resemble the 1990-1991 downturn, which featured sharp drops in consumer and business spending and lasted eight months.
Thirty-two of the 43 economists (74%) who answered the question last week in a survey by USA TODAY said lawmakers should pass a stimulus bill to soften the blow. 'It won't keep us from going into recession,' PMI Group chief economist David Berson says. 'But it may make the difference in preventing a worse recession.'
Congress enacted a $168 billion stimulus bill earlier this year that included federal income tax rebate checks of as much as $600 per person. Without recommending an amount, Federal Reserve Chairman Ben Bernanke last week supported a second stimulus bill. Congress could return for a lame-duck session after next Tuesday's election to consider it.
Nearly one-third of the economists, who come from businesses, trade groups and universities, said the most effective way to stimulate the economy would be through tax cuts. Other ideas include extending unemployment benefits and boosting food stamps, which would provide money that would likely be spent immediately; funding job-creating infrastructure projects; and giving home buyers a tax credit to try to stop the slide in the housing market.
Mission Residential chief economist Richard Moody and a few others suggested the federal government give money to state and local governments, whose budgets are suffering from less tax revenue as homes lose value and people lose their jobs.
'It would help them keep providing basic services and help keep people on their payrolls,' Moody says.
Asked which of the prior recessions the current downturn will most resemble, 40% of the economists, a plurality, cited the 1990-91 period. The unemployment rate in that downturn continued to rise after the recession was over in March 1991, eventually reaching 7.8% more than a year later. The rate was 6.1% last month.
Approximately a fifth of the economists said they expect the recession to look more like the 1981-82 downturn, which lasted for 16 months, one of the longest for the USA.