Tags: corzine | stimulus | obama

Corzine: Economy Needs New Stimulus Plan

Thursday, 21 Aug 2008 04:33 PM

New Jersey Governor and former Goldman Sachs Chairman Jon Corzine says he wants a second stimulus package to save the U.S. economy, one that creates new jobs.

In an interview, the Democratic state governor says that giving taxpayers more money, possibly in the form of help with energy bills as winter begins, would be understandable.

But, he says, the better answer would be spending money on transportation upgrades that would create construction industry jobs.

"I think we need another stimulus package," Corzine tells Bloomberg TV. "I would like to see it a little more targeted on the area where jobs are made."

Corzine supports fellow Democrat Barack Obama, who as candidate for president has pitched a new stimulus plan that would send $1,000 rebate checks to low- and middle-income workers at a cost of $65 billion.

Corzine, however, disagrees with simple cash distribution. "I don't have a problem with rebates helping people with energy bills, but I think we need something with a multiplier and a long-term impact on our states," he says.

The first tax rebate plan cost $168 billion, most of which was earmarked for cash payments to taxpayers in hopes that spending would support the economy. Government economists, however, calculate that between 10 percent and 20 percent ended up getting spent, and the rest went into savings or to pay debts.

Corzine says that the U.S. economy is very weak and subject to a serious downturn if it were to be it with another big piece of bad news.

"If you saw another shock in the mortgage market, a Fannie Mae or Freddie Mac concern, the kind that everyone is concerned about, if you saw a reignition of the oil price as we have seen today and that continued and held over a period of time, I think that would be very, very damaging to the economy," he says.

But, the bottom line remains housing, Corzine says. Existing home sales are down 15.5 percent from a year ago, reports the National Association of Realtors. Median prices fell 6.1 percent to $215,000.

"The baseline issue is the value of home prices has to stop going down if we're going to get the financial institutions out of the business of having huge write-offs quarter after quarter," says Corzine.

That's because the banks cannot tell the holders of mortgage-backed bonds what those investments might be worth if the underlying assets continue to slip.

The resulting uncertainty is feeding the continuing economic cycle of pain, Corzine says.

"As long as we continue to see continuing declining home prices, I think you’re going to see a lot of pressure on the consumer, a lot of pressure on the financials, and I think that's going to spin into the broader economy, which it already has," he says.

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New Jersey Governor and former Goldman Sachs Chairman Jon Corzine says he wants a second stimulus package to save the U.S. economy, one that creates new jobs.In an interview, the Democratic state governor says that giving taxpayers more money, possibly in the form of help...
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