Bush asks for up to $75 billion stimulus; Greenspan agrees economy needs jolt
WASHINGTON (AP) – President Bush urged Congress on Wednesday to pass an economic stimulus package of up to $75 billion driven by a new round of tax cuts. Democrats agreed the ailing economy needs a jolt, and Federal Reserve Chairman Alan Greenspan also gave the green light.
”I know people are hurting,” Bush told business leaders in New York.
Bush wants a plan of between $60 billion and $75 billion that would accelerate income tax cuts currently set to take effect in 2004 and give tax rebates to millions of lower-income workers who didn’t qualify for this summer’s checks. The president is also pushing an extension of unemployment benefits.
In addition, Bush wants several tax breaks for business – some retroactive to Sept. 11, the date of the terrorist attacks – and has an open mind about a Democratic proposal to raise the $5.15-an-hour minimum wage, Treasury Secretary Paul O’Neill said.
The terrorist attacks, Bush said, ”shocked our economy just like it shocked the conscience of our nation.” Congress and the administration, he said, must ”provide a kick start to give people reason to be confident, and we will do that.”
The stock market responded in robust fashion, with Dow Jones industrials rising 170 points to close above 9,000 for the first time since the terrorist attacks.
A few hours after Bush and O’Neill spoke, Greenspan and former Treasury Secretary Robert Rubin told congressional leaders in a private meeting that the economy, which some officials believe is already in a recession, clearly needs additional stimulus of the size Bush is proposing.
Greenspan, who had previously counseled a go-slow approach, also said the package should be temporary, perhaps one or two years, according to participants.
At the size Bush is proposing, the action would bring the total economic stimulus since the terrorist attacks to well over $100 billion. Congress has already passed a $40 billion emergency spending package and a $15 billion airline aid plan.
O’Neill told the Senate Finance Committee he now believes national output declined in the just-ended quarter but a turnaround was possible for the fourth quarter if consumer confidence rebounds. There is some evidence of increased business, he said.
”We’re certainly seeing a trend of Americans, even with a heavy heart, getting back their economic footing,” O’Neill said.
Democrats generally agreed that Congress needs to act, even as they worried that a stimulus package would mark a return to deficit spending that could cause future fiscal problems such as higher interest rates.
”This is deficit spending once again and its very disconcerting to many of us. But I don’t know that there’s an alternative. We are in an economic and military and security emergency,” said Senate Majority Leader Tom Daschle, D-S.D.
Bush officials said O’Neill’s testimony amounted to a roadmap of what the president wants. It includes:
– Accelerating some of the income tax cuts that are part of this year’s 10-year, $1.35 trillion tax relief package, so that the 1 percentage point reductions planned in 2004 would take effect in 2002. This would fatten the paychecks of millions of taxpayers but would make no change in the two bottom tax rates.
– Providing a new round of tax rebates to about 30 million workers who missed this summer’s checks because they pay only Social Security payroll taxes and not income taxes. Several lawmakers want rebate checks to arrive just before the holiday buying season.
– Extending the 26-week limit on unemployment benefits, perhaps by 13 additional weeks. O’Neill said Bush believes this addresses ”the human compassion aspect” of rising unemployment rates. In addition, the president wants to increase a Labor Department grant program used by states for emergencies.
– For business, accelerating depreciation that companies use to write off the cost of investment and increasing expensing write-offs for the purchase of equipment. These changes could be retroactive to Sept. 11 so that firms would spend money right away. Aides said Bush was also open to other business ideas, such as reduction or even repeal of the corporate alternative minimum tax that can hit a struggling company with a big tax bill.
O’Neill did not mention cuts in the corporate income tax or the capital gains tax on investment, both of which many Republicans are pushing. Senate Minority Leader Trent Lott, R-Miss., pressed Greenspan on capital gains, and GOP leaders hope to pressure the White House into accepting a cut, said Republican sources who spoke on condition of anonymity.
The Treasury secretary also did not advocate an increased minimum wage but said Bush would consider it. Some Democrats are seeking an increase of up to $1.50 an hour. The federal minimum wage currently is $5.15 an hour.
Republicans and Democrats have a host of other ideas that could quickly run up the cost of the legislation, and many Democrats want less in tax cuts and more in spending. For instance, Sen. Edward M. Kennedy, D-Mass., circulated a 12-month, $16 billion proposal for a 50 percent federal match for COBRA health insurance policies that workers can get when they lose their jobs.
Some Republicans also grumbled that many proposals, such as the unemployment benefit extension, would take money away from greater business tax breaks that would provide more stimulus.
”We could wind up with a big package that is not going to be stimulative at all,” said Sen. Fred Thompson, R-Tenn.
Political realities in Congress mean that priorities will have to be addressed.
”I’m prepared to sit down with you all,” O’Neill said.
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SOUTH LAKE TAHOE, Calif. — Following above normal seasonal temperatures on Thursday, the Lake Tahoe Basin will have cooler, windy conditions, with possible rain and snow showers, later this week and into the holiday weekend.