Bernanke supports Democrats' stimulus plan for US economy

Ben Bernanke, the chairman of the Federal Reserve, has thrown his weight behind Congressional efforts for a second stimulus package for the US economy.

Democrats have been pushing for a $150bn-plus bill containing raised unem-ployment benefits, public works projects to build new roads and bridges, and federal aid to prevent cuts in state government services – a package which they hope will limit the severity of any recession. A stimulus earlier this year doled out $168bn, mainly in tax reb-ates, which boosted consumer spending and kept the US economy growing in the second quarter, despite the credit crunch.

Related articles

• Manufacturers' confidence sees sharpest fall in 28 years
• Fall in number of homes changing hands
• Financial turbulence hits flight numbers
• Debenhams reports 4pc fall in profits
• The spreading global storm
• Terence Blacker: We're in the grip of money madness
• Cameron's £64bn question: why is borrowing so high?
• Iceland close to agreeing £3.5bn economic rescue deal with IMF
• Search the news archive for more stories

Testifying before the House budget committee yesterday, Mr Bernanke said any fiscal action "inevitably in-volves trade-offs" that may "burden future generations", but he added: "With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate."

Although lawmakers pushed Mr Bernanke to suggest the most effective size of any stimulus, he declined, falling back into the traditional role of Fed chairman, who typically does not in-volve himself in government spending debates. He also refused to pick bet-ween possible stimulus measures, which could also include more personal tax rebates, refinancing help for struggling mortgage borrowers, and tax cuts for business investment. He said only that a package should be "substantial".

A Congressional bill is not a foregone conclusion, however. The committee's senior Republican, Paul Ryan, said in the hearing that the Democratic plan was "bloated" and may balloon the budget deficit to $1trn without providing anything other than a short-term economic boost.

Mr Bernanke said the deficit was "large" but "not totally inappropriate given the nature of the emergency that we're facing and not totally avoidable given the loss of tax revenues".

A White House spokesman said George Bush would be open to signing a bill. Mr Bush said that credit markets and business confidence were being slowly repaired.