A panel of economic experts offered lawmakers varying approaches to stimulating the flagging U.S. economy, suggesting that infrastructure and transportation improvements could give an economic boost.
Testifying before the powerful Ways and Means Committee, Jared Bernstein, director of the living standards program of the Economic Policy Institute, offered his support for increased transportation and infrastructure funding.
The proposal to invest in the country's infrastructure is popular among Democrats who view it as a needed investment that would at the same time create jobs and the basis for future economic growth. But some critics have argued that such projects would take too long to get started and thus not provide an immediate economic boost.
Bernstein, however, cited reports that showed between $8 billion and $18 billion of projects that could be started within 30 to 90 days of the implementation of a federal infrastructure allocation.
He also argued that the longer-term nature of the programs could actually be a benefit because the past two short and relatively mild recessions had been followed by longer periods of slow job growth.
"From a job market perspective, those investments will still be needed long after the official end of the recession," Bernstein said.
However Alan Viard, a scholar with the American Enterprise Institute countered that infrastructure spending often makes the economy more volatile while offering only "illusory hopes" of job gains.
Even with a federal allocation premised on projects that could be started quickly, there would still be regulatory and administrative delays that would gum up the works and slow the investment programs that would rob them of any stimulative effect on the economy, Viard said.
Viard counseled the committee to look to other modifications of the tax code or spending adjustments to boost the nation's economic engine.
Robert Greenstein, executive director of the Center on Budget and Policy Priorities, warned the committee that the nation was poised to go into a potentially long and deep recession with problematic holes in the social safety net.
Many economists believe that unemployment rates could rise to about 8 percent, Greenstein said, arguing that efforts to strengthen unemployment insurance benefits would both help protect workers and boost the economy.
That is because those receiving unemployment and food stamps are among the most "cash constrained" in the country and thus more likely to spend, dollar for dollar, any federal assistance they receive. That stands in contrast to the earlier round of economic stimulus checks, which many economists estimate went half for additional consumption and half toward retiring debt.
"What gives you the best bang for your buck," Greenstein asked. "What is most effective at increasing aggregate demand in the economy? … If you have X billion you want to fill that size with the things that are the most effective stimulus."
Greenstein argued that unemployment insurance reforms, from extending benefits due to expire to modernizing the system so it offers benefits to part-time workers, increasing aid in food stamps and helping state governments cover their impending financial shortfalls would be his top three priorities.
He added that other ideas may be good policy and worthy of adoption but they might better be moved through Congress in other ways than including them in an emergency economic stimulus program.
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