Bush: Tax rebates best stimulus for slow economy
Published: Friday, January 18, 2008 at 11:01 a.m.
Last Modified: Friday, January 18, 2008 at 11:01 a.m.
WASHINGTON - President Bush backs tax rebates as the best way to stimulate the economy, but will not detail how big they should be, an administration official said Friday.
Democratic congressional leaders agree that one-time checks should be in the package, but are working on a broader measure that would also include aid targeted to the poor and unemployed. Bush planned to lay out his position publicly for the first time later Friday, first in remarks at the White House and later at a Frederick, Md., manufacturing plant.
White House spokesman Tony Fratto said earlier that Bush also will outline about how much the government should spend in order for the short-term growth package to be effective. This new White House bottom line likely would significantly shape the president's negotiations with Congress.
"It's hard sometimes for people to understand how large this economy is," Fratto said. "So he'll have something to say about how large a package."
Fratto said there are many ways to get quick agreement so that a measure can be in place and start working. 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.
"What he believes is that we've got to do something that is robust. It's going to be temporary and get money into the economy quickly," Treasury Secretary Henry Paulson said Friday on CBS's "The Early Show." ''It's going to be focused on consumers, individuals, families — putting money in their pocket. And it's going to be focused on giving businesses the incentive to hire people, to create jobs."
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 under a White House plan.
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.
The scramble to take action came as fears mounted that a severe housing slump and a painful credit crisis could cause people to clamp down on their spending and businesses to put a lid on hiring, throwing the country into its first recession since 2001.
Federal Reserve Chairman Ben Bernanke entered the stimulus debate Thursday, appearing before the House Budget Committee to endorse the idea of putting money — as soon as possible — into the hands of those who would spend it quickly and boost the flagging economy.
Especially important is making sure a plan can put cash into the hands of poor people and the middle class, who are most likely to spend it right away, he said, though the Fed chairman added that research shows affluent people also spend some of their rebates.
Bernanke declined to endorse any particular approach, but did say he preferred one that would not have a long-term adverse impact on the government's budget deficit.
Aides to lawmakers involved in the talks said the White House also wants to eliminate the 10 percent income tax bracket for one year and issue a rebate within months. Paulson said the business section of Bush's plan would be focused on "giving businesses the incentive to hire people, to create jobs."
But advocates for the poor said that tens of millions of people in lower income ranges would be left out or not fully feel the benefit of the White House plan.
Lawmakers were instead discussing a $500 rebate for individuals, the aides said, 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.
House Speaker Nancy Pelosi said she wanted legislation enacted within a month and said the government must "spend the money, invest the resources, give the tax relief in a way that again injects demand into the economy, puts it in the hands of those who need it most and into the middle class ... so that we can create jobs."
The White House stressed that the sides are close together. "We're largely in the same range of ideas," Fratto said.
When talking to lawmakers, the president did not push for a permanent extension of his 2001 and 2003 tax cuts, many of which are due to expire in 2010, officials said. That would eliminate a potential stumbling block to swift action by Congress, since most Democrats oppose making the tax cuts permanent.
Fratto said the White House still would like to see the tax cuts made permanent, but regards that as separate from the stimulus effort.
For now, Bernanke was hopeful the country could skirt a dangerous downturn.
"We're not forecasting recession but, rather, at this point, slow growth," he told lawmakers. Still, the toll of the housing and credit debacles will be felt into early next year, he added.
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