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100 CEOs call for about $500 billion in fiscal stimulus

Posted Nov 19th 2008 5:53PM by Joseph LazzaroJoseph Lazzaro RSS Feed
Filed under: Forecasts, Politics, Federal Reserve, Recession

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The case for a large fiscal stimulus package has received a shot in the arm, but as with so many economic developments during this decade, there's an upside and a downside.

A group of about 100 CEOs has urged President-elect Barack Obama to "quickly implement" a stimulus package of roughly $500 billion. The CEOs said the package should emphasize investment in infrastructure, including roads, bridges and other construction, as well as alternative energy projects. Their second priority: improving education.

Economist David H. Wang has extracted positive and negative threads from the CEOs' statement.

"On the one hand, the added CEO support will be welcome, I am sure, by the Obama Administration, as it builds the case for its stimulus package," Wang said.

"On the other hand, the fact that CEOs are calling for government spending, which is not a traditional CEO stance, tells you about the seriousness of our economic problem," Wang said. "The U.S. economy is in rough shape and there are few signs of improvement."


Fed now sees yearlong recession

Further, that rough shape was underscored Wednesday when the U.S. Federal Reserve, in the minutes from its October 28-29 meeting, said it now expects the U.S. economy to perform more poorly in 2009 than it did earlier this year. Without using the word 'recession,' the Fed said it "generally expected the economy to contract moderately in the second half of 2008 and the first half of 2009, and agreed that the downside risks to growth had increased."

"In other words, the Fed is forecasting a recession lasting about one year," Wang said.

The Fed now expects U.S. GDP growth of 0.0-0.3% in 2008 and between -0.2% and 1.1% in 2009. In June, the Fed had expected 1.0-1.6% growth in 2008 and 2.0-2.8% growth in 2009.

President-elect Obama has said if a stimulus package is not approved by the lame-duck U.S. Congress, it will be the first thing he gets done as president of the United States.

Regrettably, Wang said no recent data he's seen suggests that President-elect Obama should change that plan. "We are in for a longer than expected recession, so the sooner a large fiscal stimulus package is passed, the better," he said.

Economic Analysis: To be sure, the group of 100 CEOs does not represent the entire Fortune 500, but they still form a politically-important lobby -- one that will speed passage of the needed 2009 fiscal stimulus package.

Tags: CEOs, Congress, Democrats, Fed, Fed minutes, fiscal policy, fiscal stimulus, gdp, inthenews, Obama, Republicans, U.S. economy

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