With pleas from the Federal Reserve chairman for Congress to act quickly to stimulate the slowing national economy, deep divisions exist between Democrats and Republicans on how to best kick-start the economy.
While optimism remains that Democrats can reach an accord with the White House on a stimulus package, there are signs of partisan division. California, with much to lose and its powerful economy weakening, is watching the debate closely.
Speaker Nancy Pelosi told reporters this week that she was hoping a deal could be negotiated. “That would be our hope,” Pelosi said Wednesday, when asked if a bipartisan agreement was possible.
Pelosi said House Democrats would be meeting with House Republican leaders this week and would meet with President Bush next week.
White House officials have indicated that Bush plans to outline his stimulus proposal sometime this month and will make it a major part of his State of the Union address on Jan. 28.
Federal Reserve Chairman Ben Bernanke is expected to call for a temporary stimulus package, with tax cuts or new government spending, even if it increases the federal budget deficit.
Bernanke is not expected to endorse a specific spending or tax cut package, leaving that to the partisan warriors on Capitol Hill.
Former Treasure Secretary Lawrence Summers on Wednesday told a Congressional panel that tax cuts were needed. Summers also recommended an economic trigger that would release more money if the economy continued to deteriorate.
Summers said the risks “of ‘too little, too late’ are far, far, far greater than the risk of ‘too much too soon.’”
So what does it mean for California?
A spokesman for Assembly Speaker Fabian Núñez said the speaker will be looking for some financial support from the feds to help the state out of its budget mess.
“After the devastating economic policies of the Bush administration, we need Washington to invest the industries that drive California’s economy. That includes research and development, alternative energy and education,” said Núñez spokesman Steve Maviglio.
Democrats have advocated more targeted tax cuts for lower- and middle-class Americans, and increased unemployment benefits. The issue has become a talking point on the campaign trail as well.
Earlier this week, Sen. Hillary Clinton outlined her economic stimulus package while campaigning in California. Her plan calls for new assistance to alleviate the subprime mortgage crisis, $25 billion to offset rising heating bills and a $10 billion expansion in unemployment benefits.
Illinois Sen. Barack Obama has proposed a tax rebate for workers and Social Security recipients.
Republicans in Washington have mentioned making permanent the tax cuts passed earlier in the Bush administration.