Economic Stimulus Plan Gains Traction in Congress

Democratic and Republican leaders of the U.S. House agreed Wednesday to develop a bipartisan economic stimulus plan to help avert a possible recession.

"There is an agreement that we will work together to try to bring forward a package that truly is stimulative," House Republican Leader John Boehner of Ohio told reporters following a meeting with House Speaker Nancy Pelosi of California and other congressional leaders.

Shopper with bags
Kirsty Wigglesworth
Shopper with bags

"I'm optimistic that we can go forward," Pelosi said, adding that she hoped it would be done in a timely manner.

High oil prices coupled with a housing crisis and credit crunch have economists and lawmakers worried that the U.S. economy could tip into a recession before the November
congressional and presidential elections.

Lawmakers have said they plan to move quickly on a package of around $100 billion to $125 billion to help give the economy a boost in hopes of heading off a downturn.

Pelosi's session with Boehner followed conversations earlier this week with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson. Congressional leaders are scheduled to meet next Tuesday with President Bush.

Bernanke, meanwhile, wants Congress to act quickly to pass an economic stimulus package, Sen. Charles Schumer told CNBC.

Schumer recounted a conversation he had Monday with the central bank chief, who did not discuss specifics but encouraged legislators to move rapidly to help jump-start the economy.

"It's his tradition not to get into specifics, although he did say the No. 1 watchword that would make this effective would be getting the money out quickly," Schumer said in a live interview Wednesday. "The worry is Congress will spend a lot of time arguing back and forth, dithering and not doing anything until June or July and that may be too late."

Bernanke testifies to Congress on Thursday amid a chorus of election year demands for action to stop the U.S. economy from being tipped by a slumping housing market into recession. His testimony will be aired live on beginning at 10 am.

While Schumer did not give a timetable himself on how soon Congress can get the stimulus package through, House Majority Leader Steny Hoyer said passage could happen within a month.

"I think it can be done in 30 days," Hoyer told reporters. "Whether it will be done in 30 days is obviously another question."

Many analysts, however, have said Congress was unlikely to act swiftly enough to do much good for an economy heavily weighed down by a deep housing slump, high energy costs and
tight credit.

Hoyer, however, said it was possible Democrats and Republicans could come together quickly. "Bipartisanship is breaking out all over," the Maryland Democrat said.

Among the main tenets of the stimulus package would be an instant cash rebate to taxpayers of up to $500, an increase in spending including extended unemployment compensation and business tax credits.

An aide to a Republican member of the House of Representatives Budget Committee, which will hear from Bernanke on Thursday, said the Fed chief would be quizzed about the risks of a "quick Band-aid solution" bringing "significant harm to the longer-term budget outlook."

"I will ask him what steps he believes are necessary to address the problems troubling our economy," said Rep. John Spratt, the Democrat from South Carolina who chairs the budget panel.

"The Federal Reserve has been easing monetary conditions in response to this slowdown, but Congress and the president must move quickly to enact a fiscal stimulus plan as a complement to the Fed's actions," he said in a statement on Tuesday.

The Fed has slashed its key interest rate by a full percentage point since mid-September and financial markets expect Bernanke on Thursday to restate his remarks of Jan. 10 "to take substantive additional action as needed to support growth."

This was read by markets as a signal to expect a half-percentage point interest-rate cut at the Fed's next meeting on January 29-30. Bernanke's words on the economy will be examined closely for any sign of a shift in tone.

-- Reuters contributed to this report.