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President Bush, acknowledging the risk of recession, embraced about $145 billion worth of tax relief and other incentives Friday to give the economy a “shot in the arm. ”
Bush said such a growth package must also include tax incentives for business investment and quick tax relief for individuals. And he said that to be effective, 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.
White House advisers say that in current terms, 1 percent would amount to around $145 billion, which is along the lines of what private economists say should be sufficient to help give the economy a short-term boost.
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 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.” But he also used his announcement to defend his tax cuts, which are set to expire unless the Democratic-led Congress opts to extend them.
He acknowledged Americans’ fears of an economic downturn.
“The economy’s still creating jobs, though at a reduced pace,” he said. “Consumer spending is still growing, but the housing market is declining. Business investment and exports are still rising, but the cost of imported oil has increased.”
He said his advisers and many outside experts expect that the U.S. economy will continue to grow over the coming year, but at a slower rate than the past few years.
“Continued instability in the housing and financial markets could cause additional harm to our overall economy and put our growth and job creation in jeopardy,” he said.
Bush said markets rise and fall, and there are times when swift, temporary action by the government can help ensure that market fluctuations do not undermine the economy. “This is such a moment,” he said.
“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.”
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. A White House plan is looking at rebates of up to $800 for individuals and $1,600 for married couples.
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 that would also include aid targeted to the poor and unemployed.
White House deputy press secretary Tony Fratto said there are many ways to get quick agreement. Bush chose to lay out “principles” with few specifics to the American people now, while bipartisan negotiations with Capitol Hill are taking place 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 left for a visit at a Frederick, Md., manufacturing plant.