Economic stimulus loses steam in Congress

Panic over attacks waning, experts say

War On Terrorism

November 24, 2001|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHNGTON - The drive by Congress to jump-start the sputtering economy seems to be running out of gas.

Legislation to help reverse the economy's slide is the last item of unfinished business on the congressional agenda shaped in response to the Sept. 11 terrorist attacks. But the measure appears to have lost the aura of urgency that may be required to break a partisan impasse and enact it before this year's congressional session ends in a few weeks.

"I would say the chances of passage are down to 50-50 from about 3-to-1 a couple months ago," said Robert Reischauer, a former director of the nonpartisan Congressional Budget Office.

The difference, he said, is that "the panic has dissipated. Two months ago, we seemed to have a war without end and an economy without support. Now the war seems to be winding down, and while the economy is causing some pain, a whole lot of Americans are going about their business as usual."

President Bush says he believes the economy still needs a fiscal policy stimulus. He has promised that when Congress returns Tuesday from its Thanksgiving recess he will turn up the heat on the Democratic-run Senate, which has been unable to muster enough votes to pass any version of the legislation and can't agree on how to begin to negotiate a compromise.

"There was a period of time when people said we'd never get an airline security bill, and after a lot of hours of hard work, we got a good bill," the president reminded reporters last week. "I hope I'll be able to sign an economic stimulus package - and I think I will be able to do so. But it's going to require the senators to come together."

However, there is not yet the same political drumbeat for a package of spending and investment incentives akin to what the lawmakers heard when they wrangled over legislation designed to soothe frightened airline passengers and help rescue the ailing air travel industry.

"I think over the next 10 days to two weeks the clamor to pass some economic stimulus bill will grow louder and more robust, but I don't think it will ever reach the point where we are not willing to go home without doing it," said Sen. Pete V. Domenici, a New Mexico Republican seeking a compromise on the legislation. "And we might just do that."

As the initial panic from Sept. 11 subsides, lawmakers as well as economists are taking a second look at whether additional stimulus measures will have the desired effect. Some argue that enough has been done.

The Federal Reserve Board has cut interest rates 10 times in the past year. Congress has enacted a $1.35 trillion, 10-year cut mostly in individual tax rates. The president is spending $55 billion in defense, emergency, disaster relief and aid to the airline industry.

What's more, there are signs the economy is beginning its upturn. New claims for unemployment benefits fell last week for the fourth week in a row, while a survey of consumer sentiment released Wednesday found greater optimism for the second straight month. "There's an awful lot of stimulus already in the pipeline that is just beginning to take effect, and it is likely to cause a lot of volatility and turbulence in the economy early next year," said Tom Carpenter, chief economist for Chevy Chase Trust. "If Congress passes something else now, I think the assessment six months from now will be that it came too late and we didn't need it."

Democrats, in particular, seem to be coming to this view. Senate Majority Leader Tom Daschle said recently that he doesn't think the term "stimulus" is appropriate anymore to describe the legislation. The approach the South Dakotan backs is more focused on relief for laid-off workers and recovery from attack damage as well as new security spending on transportation facilities and public utilities.

But another impediment to enactment is that Democrats as well as Republicans appear to have gotten greedy.

Before Sept. 11, there was broad, bipartisan consensus on Capitol Hill that despite a shrinking surplus of general fund revenues Congress would not return to its previous practice of dipping into Social Security tax money for new spending for other purposes.

That restraint disappeared when the nation suddenly found itself facing war and recession.

All $55 billion of the emergency aid enacted in the wake of the attacks is coming from the Social Security surplus. An economic stimulus package would also have to be financed from the same source and would probably drive the budget back into deficit once the Social Security surplus was exhausted.

About $52 billion remains of the anticipated Social Security surplus for 2002, according to Senate Budget Committee estimates. That figure is expected to be adjusted downward when layoffs from the fall are factored in because the Social Security fund is financed by payroll taxes, half paid by workers and half by employers.

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