Democrats: Stimulus by mid-February
Top infrastructure experts meet with House Democratic leadership to determine course for jobs and economic recovery package.
NEW YORK (CNNMoney.com) -- As President-elect Barack Obama continues to push for quick action on a large-scale economic stimulus program, top Democrats on Wednesday said Congress must pass the bill by mid-February.
At a meeting of The House Democratic Steering and Policy Committee, Speaker Nancy Pelosi, D-Calif., said Congress must set Presidents Day as a deadline to pass a stimulus and jobs package aimed at saving or creating 3 million jobs.
"Nothing can be clearer than the fact that we need action, and we need action now," said Pelosi. "Failure to act quickly can only mean more job losses and more pain for Americans."
The committee, led by Pelosi and other House committee chairmen, met with leading infrastructure experts to help them determine the best course of action for an economic recovery plan.
Rep. David Obey, D-Wis., chairman of the House Appropriations Committee, asked the panel what would happen if Congress took until March to pass a stimulus package.
"If you wait 2-1/2 months, it would be a very serious problem," said Mark Zandi, chief economist of Moody's Economy.com. "The country is losing half a million jobs in a month, and if the government doesn't act quickly, there's no reason that wouldn't intensify."
Robert Reich, who served as secretary of labor in the Clinton administration, agreed that quick action on jobs is needed, saying the government needs to shift its focus from Wall Street to Main Street.
"The core problem we face is not access to capital," said Reich. "American consumers, whose purchases represent 70% of the economy, do not have the purchasing power to maintain overall demand for American goods and services."
To avoid another 3 million lost jobs in 2009, Reich recommended the government launch a stimulus program amounting to at least 6.5% of overall gross domestic product, or about $900 billion - more than Obama team estimates of about $800 billion.
"The danger is not that the government will do too much; the danger is that it will do too little, too late," Reich said. "This must be a rapid - and I want to emphasize rapid - response."
Even some conservative economists who usually pooh-pooh huge government spending projects have said the government must spend its way out of the current downturn.
"We're going to need a fiscal stimulus plan that designs tax cuts and spending changes in the most effective way," said Martin Feldstein, past president of the National Bureau of Economic Research. "It pains me to say that, because I'm a fiscal conservative who hates deficit spending, but it is important to have that fiscal stimulus at this time."
Feldstein said lawmakers must be careful not to get carried away with their spending, however, and he stressed the need to stop the spending increase once the economy rebounds.
"Raising discretionary spending by 40% has the chance of becoming wasteful spending," he said. "Congress should ensure it has a clear exit strategy."
"It's important that we don't limit our definition of infrastructure to concrete," said Reich. "When we invest in schools, teachers and early childhood education, the payoff is extraordinarily high."
Maria Zuber, a professor of geophysics at MIT and Norman Augustine, an aerospace businessman, stressed the need to spend on science and technology education to create lasting new jobs and to advance America's position as a leader in innovation.
"We need a companion effort to these proposals that addresses long-term job creation," said Augustine. "What replaces them when the jobs run out? Investments in science and technology are likely to underpin any advancement in our country, helping to solve the energy problem, and creating new jobs."
Reich, Zandi and Feldstein also said a focus on housing is needed for stimulus to have the desired effect on the economy.
"It will be very hard for any stimulus to succeed if Americans continue to lose their homes," said Reich.
He suggested one solution would come from allowing homeowners to write down the value of their homes in bankruptcy. Zandi called for a return to mortgage-backed securities purchases to free up banks' balance sheets and resume lending.
"We need a large foreclosure mitigation program," said Zandi. "It will be costly but a good investment."
Speed is of the essence, the economists argued, so housing legislation should probably come from already allocated money, such as the Treasury Department's Troubled Asset Relief Program.
"Given how quickly this bill needs to be delivered to the president's desk, and since there are so many different views on how to deal with the foreclosure issue, perhaps it is best as a 'TARP 2' plan and not part of stimulus," Reich argued.