With evidence mounting that the nation is headed for a recession, Republicans and Democrats this week battled over the best way to boost the ailing economy. The issue took on new urgency in the wake of several reports pointing to sharp economic decline. The unemployment rate took its biggest jump since 9/11, manufacturing fell to a five-year low, and consumer spending, which had been stubbornly resilient, is starting to sag. The Dow hit its lowest mark in nine months, after investors were rattled by news that Citigroup posted a $9.8 billion loss in the fourth quarter—a stark reminder of the troubled housing market. “There is certainly enough out there to make people worry,” said Standard & Poor’s chief economist David Wyss. “We think we are getting very close to a recession.”
Federal Reserve Chairman Ben Bernanke would not directly say he believes the economy is sliding into recession. But he did speak darkly of “slow growth” and “downside risks,” while signaling that the Fed would again lower interest rates later this month—perhaps by a half-point. But the White House and lawmakers indicated rate cuts might not be enough. President Bush suggested he would propose a package of tax cuts in his State of the Union address on Jan. 28. Congressional Democrats, working on their own stimulus package, were focused on increased federal spending.
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