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Federal Reserve Chairman Ben Bernanke told
Congress Monday a fresh round of government stimulus is a good idea
because there's a risk the country's economic weakness could last
for some time.


      President Bush - backing away from an earlier stance - said he
was open to the idea.


      Bernanke's remarks before the House Budget Committee marked his
first endorsement of another round of energizing stimulus,
something that Democrats on Capitol Hill have been pushing.      "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,"
Bernanke testified.


      Repeatedly pressed for how large the stimulus package should be,
Bernanke demurred, saying that was up to Congress - along with the
exact components. However, he said the size should be
"significant."


      A trio of hard blows from the housing, credit and financial
crises has badly pounded the economy.


      Many analysts predict the economy will shrink later this year
and early next year, meeting the classic definition of a recession.
Some believe the economy already jolted into reverse during the
July-to-September quarter.


      "We are in a serious slowdown for the economy ... whether it is
called a recession or not is of no consequence," Bernanke said.


      The nation's unemployment rate - now at 6.1 percent - could hit
7.5 percent or higher by next year, according to some predictions.

      Bernanke suggested that Congress design the stimulus package so
that it will be timely, well targeted and would limit the
longer-term affects on the government's budget deficit, which hit a
record high in the recently ended budget year.


      Any stimulus package would need to kick in quickly to entice
people and businesses to boost spending and buck up the economy
during the period in which economic activity would be otherwise
weak, Bernanke said.


      Bernanke said the package also should include provisions that
would help break through the stubborn credit clog that is playing a
major role in the economy's slowdown.

      "If the Congress proceeds with a fiscal package, it should
consider including measures to help improve access to credit by
consumers, home buyers, businesses and other borrowers," Bernanke
said. "Such actions might be particularly effective at promoting
economic growth and job creation," he added.


      House Speaker Nancy Pelosi of California has said an economic
recovery bill could be as large as $150 billion. Economists have
told leading Democrats the plan should be twice the size.


      "I call on President Bush and congressional Republicans to once
again heed Chairman Bernanke's advice and as they did in January,
work with Democrats in Congress to enact a targeted, timely and
fiscally responsible economic recovery and job creation package,"
Pelosi said in a statement Monday.


      In an interview with The Associated Press on Friday, Pelosi said
Congress is unlikely to approve a tax rebate before Bush leaves
office, however. She signaled that prospects are dim for a
post-election session to pass an economic aid package.


      Democrats have already called for a $61 billion package of
jobless aid and spending, and are looking at adding to it as the
financial meltdown exacerbates the economic crisis.


      Earlier this year, Congress enacted a $168 billion stimulus
package that included tax rebates for people and tax breaks for
businesses. The rebate checks of up to $600 per person did help to
lift economic growth in the spring. However, consumers cut back
sharply as rising unemployment, harder-to-get credit, shrinking
paychecks and falling home values made people much more cautious.
In turn, businesses - worried about customers' flagging appetites -
also have retrenched.


      Bernanke's nod for another round of stimulus comes after a
flurry of drastic actions by the Federal Reserve and the Bush
administration has yet to unlock lending and calm financial
markets.


      Banks fear lending money to each other and to their customers,
creating the worst financial crisis since the Great Depression.
Businesses are reluctant to hire and boost capital investments.
Consumers have hunkered down. All the economy's problems are
feeding off each other, creating a vicious cycle that Washington
policymakers are finding difficult to break.


      The Fed chief appeared to leave the door open to additional
interest rate reductions.


      The central bank meets next on Oct. 28-29 and many economists
believe Fed policymakers will lower rates again then to brace the
wobbly economy.

      Over time, "stimulus provided by monetary policy" along with
the eventual stabilization in housing markets and improvements in
credit markets will help the economy get back on firm footing,
Bernanke said.

      The Fed and the world's other major central banks recently
joined forces to slice interest rates, the first coordinated action
of that kind in the Fed's history. That action dropped the Fed's
key rate to 1.5 percent, from 2 percent.

      "The time needed for economic recovery, however, will depend
greatly on the pace at which financial and credit markets return to
more-normal functioning," Bernanke said. "Because the time that
will be needed for financial normalization and the effects of
ongoing credit problems on the broader economy are difficult to
judge, the uncertainty currently surrounding the economic outlook
is unusually large."

      Martin Baily, who once served as President Clinton's top
economist and is now a senior fellow at the Brookings Institution,
recommended Congress immediately enact a $200 billion stimulus
package, and prepare to pass another worth $100 billion if the
unemployment rate tops 7.5 percent.

      Baily said the chances of a "severe recession are pretty high"
but not inevitable if Congress acts quickly.

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Federal Reserve Chairman Ben Bernanke told
Congress Monday a fresh round of government stimulus is a good idea
because there's a risk the country's economic weakness could last
for some time.


Bernanke gives nod to more government stimulus

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