Entries in Stimulus (13)


Bernanke Wants to Keep Fed's Stimulus Plan Going 

Alex Wong/Getty Images(WASHINGTON) -- The head of the nation's central bank told D.C. lawmakers Wednesday that he's leaving well enough alone so as not to derail the slow but steady economic recovery.

Appearing before a congressional Joint Economic Committee, Federal Reserve chairman Ben Bernanke declared that the economy is in better shape than it was at this time in 2012.

The Fed has kept interest rates at record low levels since December 2008 and Bernanke warned that raising them now could lead to slowing or ending the economic recovery and causing inflation to fall further.

Deflation might stall the economic recovery by driving down prices so low that businesses are unable to make a profit, forcing them to start laying off workers.

Speaking of unemployment, which stands at around 7.5 percent, Bernanke said it was important to keep seeing improvements in this area, especially since as many as eight million Americans, who have jobs, are only working part-time.

He maintained the Fed has no plans to stop buying $85 billion a month in mortgage-backed securities and Treasury bonds, a process that lowers long-term interest rates, including mortgage rates, which has stimulated a revival in the housing market.

Copyright 2013 ABC News Radio


Bernanke Says Fed May Boost Economy

Mark Wilson/Getty Images)(NEW YORK) -- Chairman Ben Bernanke defended the Federal Reserve’s past stimulus actions in a speech on Friday morning, saying its actions “can be effective” and more of them may be on the way.

Bernanke’s keynote speech at the Federal Reserve of Kansas City’s Economic Symposium in Jackson Hole, Wyo. was closely watched by investors for clues of additional stimulus in the form of quantitative easing, which at its simplest level aims to increase the monetary supply after the central bank buys government securities.

Though Bernanke did not announce any new Federal Reserve policies or strategies, he made clear the central bank would be open to additional action in the future.

With interest rates, in particular the federal funds rate, near zero, many critics of the Federal Reserve say there is little it can do to further stimulate the economy.

“The key with Fed policy right now lies in preventing deflation, but the markets have already backed Bernanke into a corner, in that not executing QE3 will increase deflationary risk,” said Guy LeBas, chief fixed income strategist with Janney Capital Markets.

In his speech, however, Bernanke said, “a balanced reading of the evidence supports the conclusion that central bank securities purchases have provided meaningful support to the economic recovery while mitigating deflationary risks.”

Bernanke also looked back at the financial crisis, saying, “Now, with several years of experience with nontraditional policies both in the United States and in other advanced economies, we know more about how such policies work.”

Bernanke said without the policies of the Fed, “the 2007-09 recession would have been deeper and the current recovery would have been slower than has actually occurred.”

Whether or not investors were pleased with his speech, the markets seemed to respond positively.

The Dow Jones Industrial Average rose 0.46 percent to 13,060 in mid-day trading. The Nasdaq was up 0.3 percent to 3,058 and the S&P 500 was up 0.29 percent to 1,403.

Copyright 2012 ABC News Radio


Stocks Rise on Fed Stimulus Hopes

iStockphoto/Thinkstock(NEW YORK) -- Despite worries about Europe’s debt and financial crisis, U.S. stocks are up for a second straight week.  The big-stock Standard and Poor’s 500 Index and the Nasdaq have made gains four days in a row.

Analysts say since Greece’s election on Sunday attention has turned to the Federal Reserve and its two-day meeting. There’s widespread speculation on Wall Street that the Fed will extend Operation Twist, a program that sells short-term government paper and replaces it with purchases of longer-term bonds.  The aim of this program is to keep benchmark borrowing rates for mortgages and other loans as low as possible.  With signs the U.S. economy may be weakening, the Fed may also launch a new round of quantitative easing.

A third possibility is that Fed policymakers could decide to extend their statement on keeping very low interest rates beyond 2014.

The Dow Jones industrial average rose 112 points to 12,843 at mid-day.

Copyright 2012 ABC News Radio


Fed’s Ben Bernanke Still Mum About Stimulus

Alex Wong/Getty Images(MINNEAPOLIS) -- Federal Reserve Chairman Ben Bernanke delivered his usual Sphinx-like remarks to the Economic Club of Minnesota on Thursday, revealing little detail on how the central bank could stimulate the U.S. economy.

The chairman said the Fed was “prepared to employ” stimulus at the next meeting of the Federal Open Market Committee (FOMC) Sept. 20 to 21.  But he did not say what he would do.

He also described what economists have been saying for months: the country has weak consumer demand, while the business sector is stronger.

“Bernanke issued his second consecutive awaited speech in which he more or less said nothing,” said Guy LeBas, Janney Capital Markets’ chief fixed income strategist.

LeBas said he expected the Federal Reserve chairman to be restrained in his policy implications. The Fed chair didn’t allude to the recent reported disagreement among the Federal Reserve Board of Governors about how to respond to the weak economy.

“The Committee also continues to anticipate that inflation will moderate over time, to a rate at or below the two percent or a bit less that most FOMC participants consider to be consistent with the Committee’s dual mandate to promote maximum employment and price stability,” Bernanke said.

Copyright 2011 ABC News Radio


Jobs Program: 'Grand Bargain' in Different Clothes?

Pete Souza/The White House(WASHINGTON) -- President Obama’s jobs plan could be much more than that. He may actually make another run at striking the “grand bargain” with Republicans. The plan will be unveiled some time after Labor Day.
Here’s the dilemma, and the president’s solution: The White House believes the stagnated economy needs to be stimulated. But “stimulus” is a dirty word in Washington with many Republicans arguing the first stimulus didn’t work. So, to get some short term spending to spur the economy, the president could try to give Republicans some of the long term deficit reduction they desire, especially structural changes to entitlements including Medicare and Medicaid.
White House officials say by offering such a plan, it would be difficult for Republicans to oppose it.
So is the president’s job program really the “grand bargain” in different clothes? The White House calls the short and long term efforts two different plans. But it may not be able to get one without the other.
“The president continues to believe there is something serious that we can do and can get done around addressing our long-term deficit challenges.  But these are -- the president views this as -- these are two different things here,” Principal Deputy Press Secretary Josh Earnest told reporters Friday in Martha’s Vineyard.
Jobs, the White House says, is job number one for the president. “The president's chief priority here is to strengthen our economy, to create jobs, and to support the private sector’s efforts on that -- in that regard,” Earnest said.
Even though the president will offer up new stimulus plans, the White House won’t call it stimulus.
But, the vice president said the economy needs stimulus as he returned from Asia. But when asked if the president agrees, the deputy press secretary would not use the word stimulus. “The president believes that there are certain things that the government can do to support the private sector as they lead this recovery,” Earnest said.
Bottom-line; expect the president to ask for stimulus, a lot more stimulus. And expect him to offer up long term cuts to spending, and structural changes to entitlements, and tax reform in an effort to get the Republicans on board. It sounds a lot like the “grand bargain.”
 Copyright 2011 ABC News Radio


Bernanke Speech Moves Markets: No New Stimulus

Daniel Acker/Bloomberg via Getty Images(WASHINGTON) -- Fed Chairman Ben Bernanke, in a much-anticipated speech Friday, announced no new or additional steps the Fed would take to help the ailing U.S. economy. Instead, he expressed optimism the economy could continue to recover, based on its own internal strength and from past assistance given by the central bank.

Bernanke reiterated the Fed's determination to keep the federal funds rate "exceptionally low" through mid-2013 at least. He did not, however, say what many traders had been hoping to hear: That the Fed would embark on a further round of quantitative easing -- a so-called QE3.

Markets were underwhelmed by his remarks. The Dow fell slightly, then rose 67 points to 11,218 at 11:20 a.m.; 10-year treasuries fell 2.15 percent; gold rose 1.64 percent.

The chairman said he remained strongly optimistic for the U.S. economy's long-term health, and that he expected inflation to remain at or below 2 percent. He also acknowledged, however, that the recent downgrade of the nation's credit rating had undermined both "household and business confidence."

He implied that there was only so much more the Fed could do to stimulate the economy, and that it was time now for Congress and the White House to create "policies that support robust economic growth in the long term," to reform the nation's tax structure and to control spending.

He said that the Fed would continue to review, as circumstances might demand, the full "range of tools" at its disposal to "provide additional monetary stimulus."

Copyright 2011 ABC News Radio


Government Benefits Account for $2 of Every $10 Americans Receive

Hemera Technologies/Thinkstock(WASHINGTON) -- Open your wallet. If you have a $10 bill inside it, you can thank the government for two of those dollars.

Government benefits like Social Security, Medicaid, and unemployment insurance accounted for nearly 20 percent of Americans’ income in the first quarter of 2011, according to Moody’s analysis of the Bureau of Economic Analysis’ statistics.

Some of the money from those benefits, though, will soon dry up as the stimulus funds that were pumped into federal and state programs in 2009 start to expire and deficit-reduction measures begin going into effect.

 “Things like the Recovery Act and employment benefits are having huge beneficial impacts that a lot of people don’t realize,” said Ethan Pollack, a senior policy analyst at the Economic Policy Institute. “When those programs end people will realize just how dependent they were on them.”

Pollack said the unemployment rate will likely spike in response to the reduced government funding because it will take money out of people’s pockets, causing a drop in spending and forcing more layoffs.

With the latest figures showing 9.2 percent unemployment, an uptick in the number of people out of work could mean bad news for the economy and for President Obama’s re-election.

But Brad Kemp, the director of economic research at Beacon Economics, argues the month-to-month rates are not as important as the overall trend.

“A single month‘s number does not a trend make,” Kemp said. “And that trend is going to continue to fall, but it is not going to be a smooth ride.”

Kemp pointed out that having 20 percent of disposable income coming from government benefits is still a small segment and while losing some of that money because of dried up stimulus funds would be detrimental in the short term, it would not have severe widespread consequences in the long term.

Since the recession began in 2008 government spending on social benefits programs has increased by $581 billion, according to BEA statistics. At the end of 2007, before the recession started, only $1.60 of your $10 bill would have been from the government.

Kemp said when stimulus money expires or debt-reduction measures go into effect there will “devastation to the individual, not to the society.”

“These are the people who want jobs that don’t have them and to those individuals it will be crushing,” Kemp said. “But does that mean the majority of society is going to fail? Does it mean it could slow an already slowly recovering economy? No.”

For example, the Supplemental Nutrition Assistance Program, or food stamps, used American Recovery and Reinvestment Act funds in April 2009 to increase benefits for a family of four by $80 per month. When the stimulus money runs out in October of 2013, families will see their benefits instantly decrease by $61.

Pollack said the stimulus money should continue until the economy has fully recovered, which will not be until at least 2016.

“I think the economy is far from having been recovered enough,” Pollack said. “We think there should be six months of six percent unemployment. Then we should start deficit reduction.”

Pollack said it will be a “very huge hit to economic growth” if many of the proposed budget cuts took effect immediately.

 “If you were to design a perfect plan it would reduce the deficit over the next 10 to 20 years but would invest over the next two to three,” Pollack said.

Copyright 2011 ABC News Radio


Stimulus Will Increase U.S. Deficit More than Originally Estimated

Jupiterimages/Thinkstock(WASHINGTON) -- The Recovery Act will raise the U.S. deficit by $830 billion between 2009 and 2019, more than the original estimate of $787 billion, according to a report released Wednesday by the Congressional Budget Office.

About half of that budget impact occurred in 2010, when most of the stimulus funds were distributed, the report stated.

Despite the hefty burden on the deficit, CBO found that the stimulus continues to have a positive impact on the economy and job growth.

The stimulus raised the U.S. gross domestic product in the first quarter of 2011 by between 1.1 percent and 3.1 percent, and increased the number of people employed by 1.2-3.3 million. The program’s positive effects on employment and the economy, though, are expected to wane through the year, per the report.

CBO’s analysis comes a day after a Government Accountability Office report that found the federal government awarded $24 billion in Recovery Act funds to contractors and vendors who owe more than $750 million in unpaid taxes.

Copyright 2011 ABC News Radio


Billions in Stimulus Funds Paid to Tax Delinquent Contractors

ABC News(WASHINGTON) -- Critics of the $800 billion in taxpayer money that made up the Obama administration's so-called stimulus package have more ammunition, as it has been revealed the federal government awarded $24 billion in Recovery Act funds to contractors and vendors who owe hundreds of millions in unpaid taxes. This, according to a new Government Accountability Office (GAO) report.

The nonpartisan watchdog agency reported Tuesday that at least 3,700 recipients owed more than $750 million combined in unpaid federal taxes as of Sept. 30, 2009.  They represent 5 percent of all recipients of the so-called stimulus funds.

"For many years now, we've known that a small percentage of federal contractors and grantees who get paid with taxpayer dollars shirk their responsibility to pay their taxes," said Democratic Sen. Carl Levin of Michigan. "Now the executive branch should get on with it and actually debar the worst of the tax cheats from the contractor workforce."

Levin, who chairs the Senate Permanent Investigations Committee, was to hold a hearing on the report Tuesday.

The GAO said their report likely underestimates the total amount of unpaid taxes owed by stimulus recipients.  Federal law does not require government agencies to check the tax compliance of prospective grantees.

When pushing for the Recovery Act, President Obama promised the taxpayers' money would be watched carefully, even deputizing Vice President Joe Biden with overseeing the stimulus operation, because, as Obama put it, "nobody messes with Joe."

Copyright 2011 ABC News Radio


CBO: Effects of Stimulus Spending Are 'Diminishing'

Photo Courtesy -- Getty Images(WASHINGTON) – The major effects of the initial stimulus plan are wearing off, according to the Congressional Budget Office, and will “wane gradually” during the final months of 2010.
But as stimulus spending continues, the price tag could be higher than expected.

The CBO expects the original price tag of $787 billion to end up closer to $814 billion spent into the economy from 2009-2019.

Overall, however, the CBO concluded that the Recovery Act raised the GDP, lowered unemployment and increased the number of those who are employed.

In just the third quarter, July through September, the CBO said stimulus spending increased the number of people employed by between 1.4 million and 3.6 million.

Copyright 2010 ABC News Radio

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