July 24, 2008

More Substantial Stimulus and Policy Proposals Needed to Help Americans Weather the Recession

Stimulus checks helped, but did not go far enough to ease the nation's economic pains

For Immediate Release: July 24, 2008
Contact: Alan Barber, (202) 293-5380 x 115

WASHINGTON, DC- Even as the last of the stimulus checks that have blunted the worst effects of the economic downturn are cashed, the economy remains poised on the brink of what could be a prolonged period of economic stagnation. According to a new report from the Center for Economic and Policy Research (CEPR), Congress and the administration must take action now to both provide a further short-term boost to the economy and to put the nation on a path toward sustainable growth and rising incomes for working families.

"Slow-Motion Recession: What Congress Can Do to Help," by economists Eileen Appelbaum, Dean Baker and John Schmitt, emphasizes the need both for fundamental economic reforms and for a second stimulus package to minimize economic hardship and promote growth.

“The stimulus checks approved by Congress last winter helped keep the economy afloat,” said report co-author Eileen Appelbaum. “It has given Congress the opportunity to enact a broader package of initiatives to hasten the nation’s recovery and begin to address the economy’s long-term needs.”

Quick action by Congress is required to address rising unemployment, turmoil in the financial markets, spiraling costs associated with energy prices, the implosion of the housing sector and the loss of $5 trillion in housing wealth.

The authors recommend a stimulus package comprised of:

• Grants to state and local governments so that they will not be forced to raise taxes or layoff workers and cut services in the middle of a downturn
• A “green stimulus” consisting of expanded tax credits for homes and businesses to make energy conserving renovations and subsidies for state and local governments to reduce fares on public transportation
• Green public investment through matching grants to state and local governments to invest in energy conserving renovations and improvements
• Additional payments to low- and moderate-income households through programs such as Food Stamps, School Lunches, and the Low Income Home Energy Assistance Program to make it easier for families to cope with rising food and energy prices
• Modernization of the unemployment insurance system and further extension of the benefit period

"The economy needs a further economic stimulus, but it also needs measures to reform the financial system and to address the heightened economic insecurity facing American families,” Appelbaum said. "That will require reforms to protect homeowners, reel in financial markets, and restore balance to our work and family commitments."

The report calls for passage of the Saving Family Homes Act to allow families facing foreclosure to continue to live in their homes as renters and of the Healthy Families Act so that workers do not need to choose between a paycheck and caring for their families.

The economists also call for new regulations in financial markets to limit leverage, increase transparency, and severely restrict executive compensation, as well as a modest tax on financial transactions to curb speculation and raise revenues to pay for pressing economic and social priorities.

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The Center for Economic and Policy Research is an independent, nonpartisan think tank that was established to promote democratic debate on the most important economic and social issues that affect people's lives. CEPR's Advisory Board of Economists includes Nobel Laureate economists Robert Solow and Joseph Stiglitz; Richard Freeman, Professor of Economics at Harvard University; and Eileen Appelbaum, Professor and Director of the Center for Women and Work at Rutgers University.