A lame-duck Congress must agree on a short-term plan to avoid a deep recession.
Global efforts to beat back the credit crisis are starting to take hold. But there's no rest for the weary in this battle. Now it's on to fighting off a steep recession. Big economies – Germany, Japan, South Korea – are rolling out new stimulus plans. The US should, too.
Last week's third-quarter report showing a contracting US economy should remove whatever hesitation may linger about the need for a jolt. In July, August, and September, consumer spending shriveled like rhododendrons in winter, with Americans pulling back to an extent not seen in nearly 30 years. And this was the full impact of the financial crisis became clear.
Even Ben Bernanke of the Federal Reserve, which is the institution most able to steer America's $14 trillion economy, advocates a stimulus. Indeed, with the Fed dropping interest rates to 1 percent, it's now low on additional leverage itself.
But what should a stimulus package look like? It's difficult for lawmakers to design a combination of spending and tax cuts that pushes the right part of the economy, at the right time, by the right amount.
One thing to do is mail tax rebate checks to Americans, which they received last spring as part of an earlier stimulus package. Most of that cash went to pay down debt or savings – not spending that would quickly boost the economy. Smartly, neither political party seems interested in this idea now.