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Slowing US Economy Prompts Calls for Action

Slower-than-expected U.S. economic expansion and stubbornly high unemployment have economists debating what can be done to spark growth and create jobs. Calls for more government action to boost the economy follow last year's stimulus package.

More than a year after the United States emerged from the deepest recession of the post-World War II era, U.S. economic growth is slowing and the unemployment rate continues to hover near 10 percent.

That has some economists worried about the possibility of a so-called "double dip" recession, where the economy appears to recover, only to return to negative growth.

"One-in-three probability [of a double-dip]. Less than even, but too high to take a chance," said Moody's chief economist Mark Zandi, who spoke on CBS's Face the Nation program. The somber outlook is shared by Laura Tyson, who serves on President Barack Obama's Economic Advisory Board.

"We are in a situation where we are bumping along at a slow rate," Tyson said. "There is a lot of downside risk. We need targeted policies for jobs."

Among the measures being discussed are tax credits to encourage businesses to hire new workers and spark more research and development. In addition, the Obama administration is considering extending income tax cuts enacted nearly a decade ago for all but the top two percent of earners.

"I think that is the right thing to do economically. We have to worry about the spending power of the majority of the population," said Tyson. "The 98 percent of the population for whom we would extend the tax cuts - that is where you are going to get high levels of consumption. That is where incomes are under high levels of pressure. We need to help people with their incomes."

But economist Mark Zandi has a word of caution. He agrees, as he puts it, that "the recovery needs some more help," but he adds that new stimulus projects come at a cost.

"We have to pay for them. We cannot do this unless we pay for them," said Zandi.

And so the United States faces two seemingly contradictory needs: to stimulate the economy and cut the deficit. The Obama administration seeks short-term stimulus, while promising long-term spending restraint. Just what, if anything, can be accomplished two months before the November congressional elections remains to be seen.