US spending row brews

Politicians in Washington are struggling to hammer out the details of a package aimed at getting the US economy back on its feet.

Immediately after last month's terror attack, Congress approved extra government spending to help the airline industry and the city of New York.

But as attention has turned to a wider economic package, political differences over the way forward have emerged.

The studies I have seen indicate that if you are looking for a stimulative effect then tax cuts are much better than pure government spending.

Jim McCrery, Republican

Jim McCrery, a Republican member of the Ways and Means Committee in the House of Representatives, told the BBC's World Business Report:

"The US seems to be in the midst of a recession. If that is a fact, then we need to figure out how best to turn around the economy, getting it moving again.

"It falls to the Congress, the legislative branch, to try and stimulate the economy through fiscal policy.

"We are examining ways to do that with either tax cuts to put more money back into the hands of private citizens or, some believe, direct spending by the Federal government, to generate that economic activity.

"We are looking at income tax cuts for individuals. We are also looking at an array of cuts for corporates.... probably leaning towards favouring the corporate side in terms of stimulus and proposals.

"The studies I have seen indicate that if you are looking for a stimulative effect then tax cuts are much better than pure government spending.

"The tax cuts go to the private sector, for the private sector to use in the best possible way."

He argued that tax cuts were a much more direct way of achieving growth than direct spending by Washington.

Call for spending boost

But Senator Kent Conrad, a Democrat member of the finance committee, said: "Just tax cuts alone seem to have a diminished utility.

"The president unilaterally announced a package that was all tax cuts. Hopefully, that is just a momentary lapse

Name Here Senator Kent Conrad, Democrat

"To some extent, when people get that money, they do not spend it.

"We are going to need a combination of government spending and we already know that there will be additional requests for defence expenditure.

"There is also a need for certain expenditure for intelligence, as well as infrastructure to make our cities, our airports... safer. That will also provide stimulus to the economy."

Mr Conrad called for the money to be directed to lower-income citizens, who he claims are more likely to spend it.

"The president unilaterally announced a package that was all tax cuts," he added.

"Hopefully, that is just a momentary lapse in terms of the good bipartisan relationship."