Experts warn against economic stimulus plan

The president’s last stimulus package came in 2001-2002.

MCCLATCHY NEWSPAPERS

WASHINGTON — As President Bush and Congress weigh the need for a stimulus package to ensure that the slowing economy keeps growing, experts warn that there’s insufficient evidence the effort is needed and that it could do more harm than good.

No one can yet say with certainty that the U.S. economy is about to enter a recession, defined as two consecutive quarters of negative economic growth. And by the time that becomes clear, a stimulus plan could be too late to do much immediate good.

“I just don’t see anything useful getting done quickly, and the first half of the year is the critical period,” said David Wyss, the chief economist for the rating agency Standard & Poor’s in New York.

Driving talk of a stimulus package is last Friday’s weak employment data, which showed anemic growth of just 18,000 nonfarm payroll jobs, the weakest in four years. If that’s followed by similar numbers in the months ahead, it would point to weaker consumption. And since consumer spending drives about two-thirds of U.S. economic activity, it could point to a recession.

It’s why President Bush admitted Monday that there were new “economic challenges,” and it’s what has led his aides to confirm that he’s weighing a stimulus package. Former Treasury Secretary Lawrence Summers and Harvard University economist Martin Feldstein earlier had called for targeted measures now to keep the economy out of recession.

Bush’s last stimulus package in 2001-2002, amid a recession and after the Sept. 11 terror attacks, included tax breaks for businesses to spend more on equipment, inventories and hiring. It also extended unemployment benefits, expanded food-stamp programs and provided one-time government checks to about two-thirds of all citizens.

Most of those ideas are under discussion again. The White House is mulling a citizen tax rebate to spur spending and incentives for businesses to spend and hire.