New stimulus plans should target infrastructure, some say
WASHINGTON - The $600 rebate checks the federal government sent out earlier this year may have been popular among taxpayers, but many economists say any future economic stimulus effort should focus on infrastructure spending and other targeted measures.
Spending on roads, bridges, and other public works projects would create jobs and provide more of a lasting boost to the economy than another round of rebate, several economists said. They contend a common concern about infrastructure spending - that it takes time to gear up and may not kick in until after the recession is over - is less compelling now because the US economy is likely to experience an extended downturn.
"We're going to be in a longer period of weak growth and high unemployment" than was expected earlier this year, said Laurence Meyer, vice chairman of Macroeconomic Advisers. Any new stimulus needs to "have more legs" than the rebate checks, he said.
Congressional Democrats are pushing a package that could cost as much as $150 billion, though some economists think the total should be $300 billion or higher.
Federal Reserve chairman Ben Bernanke has said a stimulus package "seems appropriate" as there is "some risk of a protracted slowdown." The White House said it was open to additional action.
Other analysts cautioned that infrastructure spending is subject to political pressures that can make it less effective.
"You don't want to build more bridges to nowhere," said Brian Bethune, of the consulting firm Global Insight.
But he said the package could include tax credits for companies that invest in wind, solar, and other alternative energy, because financing for many such projects has dried up.
Economists have mixed views about the rebate checks, which were part of the $168 billion stimulus package Congress approved in February. The checks gave the economy "a sugar high" that faded as the financial crisis intensified, said Peter Morici, an economist at the University of Maryland.
Most economists interviewed this week think a stimulus is necessary as the economy is expected to soon enter, if it hasn't already, a broad slowdown.