Bernanke Says Right Stimulus Package Would Help

Washington, DC, January 17, 2008-- Federal Reserve Chairman Ben Bernanke endorsed an economic stimulus package to help the struggling economy avoid recession in testimony to Congress today.

He also again hinted that the Fed may act aggressively to lower interest rates at its January meeting. He did not push any specific stimulus plan and instead urged Congress to think carefully before increasing spending or lowering taxes.

"A fiscal initiative at this juncture could prove quite counterproductive, if (for example) it provided stimulus at the wrong time or compromised fiscal discipline in the longer term," he said in prepared testimony to the House Budget Committee.

Bernanke's comments seemed to favor Democratic proposals aimed at low- and middle-income families that favor tax rebates and more funds for unemployment benefits, food stamps and heating assistance.

Republicans want to extend the 2001 and 2003 tax cuts beyond their scheduled expiration in 2011. "To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next 12 months or so," Bernanke said. "Any fiscal package should be efficient. Finally, any program should be explicitly temporary."

"A fiscal program that increased the structural budget deficit would only make confronting those challenges more difficult," Bernanke said.