Wall Street saw a boost Monday as Fed Chairman Ben Bernanke told Congress that a second stimulus bill might help the economy. Jeffrey Brown of NewsHour talks with Martin Baily of the Brookings Institution and William Beach of the Heritage Foundation to examine the prospects for a new stimulus plan.
JEFFREY BROWN: Just three months ago, Fed Chairman Ben Bernanke said he thought it was premature to serve up a new round of measures to stimulate the economy. But times have clearly changed, and today he weighed in positively on a notion that is now very much in play in Congress and being discussed as well at the White House.
Is another stimulus plan needed? And if so, what should be in it? We ask that of two who testified at a congressional hearing today after Bernanke spoke.
Martin Baily served as chairman of the Council of Economic Advisers during the Clinton administration. He’s now a senior fellow at the Brookings Institution.
William Beach is the director of the Center for Data Analysis at the Heritage Foundation in Washington.
Welcome to both of you.
Martin Baily, what’s the argument for a new stimulus package? And what would it be aimed at achieving?
MARTIN BAILY, Brookings Institution: Well, I was very pleased that Bernanke supported that. The economy is looking pretty ugly at the moment. I would expect that we’re going to report a negative third quarter. The fourth quarter looks like it could be substantially down. And then probably a continuing recession into the first half of 2009.
So we need to try to sort of reverse that. Initially, the financial crisis didn’t seem to be having that much ill effect on the overall economy, jobs and production, but now it is. And we need to do something to reverse that. And I think a stimulus package is definitely needed.