Warner offers his thoughts on economy

STAUNTON – The federal stimulus package and bailouts of financial institutions are difficult but necessary to combat economic woes equivalent to “a 100-year-flood’’ and war, Sen. Mark Warner told local constituents Thursday.

“In extraordinary times, extraordinary actions are needed,’’ Warner said at the Stonewall Jackson Hotel & Conference Center during the final leg of a four-day western Virginia swing.

The visit came a day after Tax Day protests – including two in Staunton and Fishersville – were staged in towns across the country.

“I don’t think I fully realized how deep a hole we have dug,’’ Warner said, reflecting on his first 90 days on the job.

Americans may know by June or July whether the massive federal spending has triggered payoffs in the economy, he said. The rookie senator and former governor added he’s hopeful that a Plan B will not be needed.

Warner showed palpable frustration with both government spending and big company financial mismanagement, and heard many of the same complaints from the audience.

Still, Warner said, the $800-billion stimulus package was needed to offset a massive $2-trillion drop in business and consumer spending forecast for the next two years.

“If we didn’t do anything to deal with the lack of consumer and business spending, the recession could become a depression,’’ Warner said.

A slice of stimulus money flowing to state and local governments is needed to stave off teacher layoffs and keep highway projects on target, Warner said.

Another portion of the money will go to provide Internet broadband for communities, help with the creation of electronic medical records across the country and develop new energy sources.

Reflecting taxpayers’ anger over huge government payouts to companies such as American International Group, Inc., Warner said he is “madder than heck’’ over excessive bonuses going to executives at failed companies.

But AIG had to be saved, he said. “We must stabilize the financial system so folks will lend money,’’ Warner said.

The same applied to the housing industry, he said. Foreclosures dragged down property values for homeowners who were making their mortgage payments on time, the senator said.

“We were seeing people lose 20, 30 and 40 percent of their home values,’’ Warner said. “Ninety percent of the people were hurt by the actions of their neighbors.”

David Karaffa, of Augusta County, who attended one of Wednesday’s tax tea parties, told Warner he fears his children will be saddled with paying the national debt years from now.

Without a stimulus package, Warner responded, school class sizes would have grown next year, not as many roads would have been repaired and college tuitions would have risen significantly.

Karaffa’s concerns were similar, Warner said, to others he heard during his four-day tour.

“There is heavy frustration,’’ said Warner, who has met with small business owners, major Southwest Virginia employers and others this week. “The short-term frustration is how do we get through this crisis. The long-term is about the deficit.”

The federal deficit last month reached a record of almost $1 trillion and could almost double by fiscal year’s end Sept. 30, according to the Congressional Budget Office.

The trend is similar with the national debt, which the CBO estimates will swell from $5.8 trillion last year to $11 trillion by 2012.