WORLD> America
US House to introduce second stimulus bill next month
(Agencies)
Updated: 2008-10-30 10:08

David Paterson, governor of New Jersey's neighbor New York, however, told the Ways and Means Committee that the first priority of a stimulus bill should be giving direct and immediate fiscal relief to states through emergency block grants and reimbursements for their portions of Medicaid, the joint healthcare program administered by the federal government and the states.

The sun splashes light on the Federal Reserve Building in Washington, DC. [Agencies]

While Paterson said infrastructure spending was also key, he added the caveat that "state budget conditions have deteriorated to the point where any federal dollars received for infrastructure projects must be free from state matching fund requirements."

In contrast, South Carolina Governor Mark Sanford begged the Ways and Means Committee not to pass a stimulus bill at all, saying the added debt would cause long-term damage to US economy.

"If you go ahead with this, the question has to be asked who bails out the bailouters," he said.

Sanford said he found irony in addressing a problem brought about by excessive borrowing, the financial meltdown spurred by the credit crisis and housing downturn, with more borrowing.

Rep. John Mica of Florida, who is the highest ranking Republican on the infrastructure committee, said a stimulus bill would not be full of "pork", the funds members of Congress often set aside for pet projects in their districts, and it should be implemented speedily.

"We should focus on eliminating red tape to move forward with projects critical to improving our deteriorating infrastructure and providing out-of-work Americans with jobs," he said.

When the first stimulus bill was considered, measures to boost infrastructure spending were dropped because many feared that distributing the money and beginning construction projects would take too long to create any economic benefits.

"I'm tired of hearing from the pointy-headed economists who say, 'Oh, these infrastructure projects take too long,'" Rep. Peter DeFazio, an Oregon Democrat, said at the infrastructure hearing. "There are some economists now... who say, 'Well, actually, this recession is probably going to be so long and so deep that argument doesn't hold sway."

Municipal Debt Considered

One way the federal government could help get money flowing through local and state economies would be to create a guarantee for municipal debt, said Timothy Firestine, Chief Administrative Officer of Montgomery County, Maryland.

"There's nobody willing to provide guarantees for short-term liquidity. That's the best place for Congress to help," he told the Ways and Means Committee, noting that some municipalities cannot make their payrolls because they cannot access short-term debt

The guarantee would be similar to that offered for commercial paper under the recently passed economic stabilization act, he said, echoing suggestions made by many in the municipal bond market

"Congress and the Treasury could also act to lift burdensome tax code requirements on corporations and property and casualty insurers that limit the amount of tax-exempt bonds that they can purchase," he said.

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