Second stimulus check gains momentum on Bernanke testimony

House Speaker Nancy Pelosi, D-California, also said she would support a properly structured second stimulus package. "Chairman Bernanke made it clear that a new economic recovery package is critical to boost our weakening economy," Pelosi said, in a statement Monday. "...Chairman Bernanke added his voice to the chorus of economists, experts and policymakers who insist that America needs a job-creating recovery package to get our economy back on track and to restore consumer and investor confidence."

Moreover, Pelosi's argument that any second stimulus package would be needed to avoid a deeper recession received support from the Brookings Institution, a Washington think tank that favors an activist role for government. Martin Neil Baily, Senior Fellow, Economic Studies, at Brookings, said a second package should total $200 billion, with a clause that kicks in an additional $100 billion in stimulus if the unemployment rate exceeds 7.5%.

The U.S. unemployment rate is currently 6.1%, but broader measures of underemployment are already in double digits. Job growth is non-existent: the nation has lost more than 700,000 jobs in the past year. The U.S. economy needs to add about 125,000 jobs per month just to keep unemployment from rising.

Baily recommended that a second stimulus package contain a mix of housing market support, tax rebates, extended unemployment insurance, job-creating infrastructure work, aid for states/localities, and business tax changes. Baily added that without a second stimulus package, GDP would decline 4% in Q4 2008 and 1.5% Q1 2009; with a stimulus package of $300 billion GDP would contract only 0.7% in Q4 2008, followed by positive growth of 0.75% in Q1 2008.

Pelosi: U.S. needs to create jobs

Along with mortgage finance assistance, Speaker Pelosi has highlighted the need to create jobs to get the U.S. economy on a sustainable growth path. Economist Wang agreed.

"There's certainly enough work out there to be done," Wang said. "We've by-and-large neglected our infrastructure. Our infrastructure, schools, hospitals, roads, highways, bridges, public transit, electric grid, are in a state of disrepair, so there's plenty of work that could be done. And these would be good-paying jobs, which would boost economic growth."

Political/Economic Analysis: Typically, the lame-duck Congressional sessions after an election is event-less: winners relax, while losers/those retiring from Congress pack up and go home. Given the U.S. economy's poor condition, this session could be different. The view from here: there's about a 60% chance Congress will pass and President Bush will sign a second stimulus package by the December holiday period.