Bush calls for economic package worth about $145 billion
Bush said such a growth package must also include tax incentives for business investment and quick tax relief for individuals. To be effective, he said an economic stimulus package would need to roughly represent 1 percent of the gross domestic product – the value of all U.S. goods and services and the best measure of the country’s economic standing.
“There is a risk of a downturn,” the president said in his remarks at the White House.
Treasury Secretary Henry Paulson, speaking after Bush’s remarks, said 1 percent of GDP would equate to $140 billion to $150 billion, which is along the lines of what private economists say should be sufficient to help give the economy a short-term boost.
Paulson said the largest part of the stimulus package would be targeted to individual taxpayers. One Republican official, speaking on condition of anonymity, said Bush was hoping to target about $100 billion toward individuals and about $50 billion toward businesses.
“The cost of not acting has become too high,” Paulson said. “We must act now.”
While Bush focused solely on taxes, Democratic and Republican leaders in Congress have been working on a broader package that also would include a temporary increase in food stamps and an extension of and perhaps increase in unemployment benefits.
The president and Congress are scrambling to take action as fears mount that a severe housing slump and painful credit crisis could cause people to close their wallets and businesses to put a lid on hiring, throwing the nation into its first recession since 2001.
Bush said that Congress and the administration need to settle on a temporary economic package that could be implemented quickly to “keep our economy growing and create jobs.”
“Letting Americans keep more of their money should increase consumer spending,” he said.
Bush outlined several criteria for the package to meet: It must be “big enough to make a difference in an economy as large and dynamic as ours,” it must be built on “broad-based tax relief,” it must take effect right away but be temporary, and it must not include any tax increases.
Specifically, he called for tax incentives for businesses, including small companies, to make new and major investments this year. “Giving them an incentive to invest now will encourage business owners to expand their operations, create new jobs and inject new energy into our economy in the process,” Bush said.
He also called for tax relief for individuals – probably to come in the form of one-time rebates. But he did not say how much money Americans would get to keep or the amount of other tax incentives that could be in the package. Nor did Bush detail how the nation would pay for such a plan.
“Americans can spend this money as they see fit: to help meet their monthly bills, cover higher costs at the gas pump, pay for other basic necessities,” he said.
House Speaker Nancy Pelosi, D-Calif., has talked of a package totaling $100 billion or more. House Republican leader John Boehner of Ohio spoke of a bill in the range of $100 billion to $150 billion. Aides have said Bush does not believe the stimulus spending should be offset – or paid for – by any tax or spending changes elsewhere. Some deficit hawks want this but it isn’t expected to be part of any package.
Speaking for about seven minutes, Bush called passing a growth package “our most pressing economic priority.”
He acknowledged Americans’ fears, while defending the economy’s fundamental strength and its continued growth – albeit slower.
“We’re in the midst of a challenging period,” Bush said. “And I know that Americans are concerned ... But our economy has seen challenging times before. It is resilient.”
Paulson said the markets are due for a needed correction, and that swift, temporary action by the government can help lessen the impact on individuals and the economy as a whole.
Bush has gone down the tax rebate road before. Back in 2001, he added refunds of up to $300 per individual and $600 per household as a recession-fighting element of the tax cut plan that had been the centerpiece of his 2000 campaign.
Economists said a reasonable range for tax cuts in the new package might be $500 to $1,000. Congressional aides said the White House plan is looking at rebates of up to $800 for individuals and $1,600 for married couples, but Paulson said the administration wants to be “intentionally not specific” in public to avoid poisoning the well with Congress.
Bush first signaled his support for the approach of income tax rebates for people and tax breaks for business investment in a conference call Thursday with bipartisan congressional leaders.
Democratic congressional leaders agree that tax relief should be in the package, but are working on a broader measure. Lawmakers are discussing a $500 rebate for individuals, said aides to lawmakers involved in the talks, with details for couples and people with children still being negotiated. The rebates would likely be limited to individuals with incomes of $85,000 or less and couples with incomes of $110,000 or less, the aides said, speaking on condition of anonymity because no final decisions had been made.
Senior aides to House Democrats and Republicans said the measure also would contain tax breaks for businesses investing in new equipment, increases in food stamps, and higher unemployment benefits. They spoke on condition of anonymity, since the talks are ongoing and lawmakers have promised not to reveal details.
Pelosi says she wanted legislation enacted within a month. “Democrats welcome President Bush’s willingness to work together with Congress to provide urgent relief to the millions of Americans facing economic hardships,” she said. “Now we will work together on the details.”
Paulson indicated that the White House approach would not include rebates or relief for those who do not pay income taxes. He also signaled Bush’s distaste for non-tax-related ideas, saying the White House goal is simplicity and speed. “We’re not looking to decorate a Christmas tree,” Paulson said.
Paulson said White House estimates show that a stimulus in the range of what Bush talked about could create 500,000 additional jobs this year.
White House deputy press secretary Tony Fratto said Bush chose to lay out “principles” with few specifics to the American people now, while bipartisan negotiations with Capitol Hill continue privately. The White House feels Bush was out of the mix for too long, because he was away for eight days in the Mideast while Democratic leaders talked almost daily about the need to stimulate the economy – and how.
The White House scheduled Bush to talk about a stimulus package twice on Friday. After the Roosevelt Room appearance, he visited a Frederick, Md., plant that manufactures lawn equipment. He toured its welding and assembly lines and planned a truncated version of his earlier remarks.
Bush said he also wants all of his 2001 and 2003 tax cuts made permanent. But, with most of the Democrats who control Congress opposing that, the White House has said it regards that issue as separate from the stimulus effort.