Bush: Economy needs 'shot in arm'
President says immediate, temporary tax cuts for businesses and individuals are needed to keep economy on track.
NEW YORK (CNNMoney.com) -- President Bush proposed a series of short-term tax cuts Friday that he said would provide a boost for the struggling U.S. economy.
Speaking at the White House, the president did not give details of his plan but said it would include tax breaks for businesses and individuals worth at least 1 percent of the nation's gross domestic product, or roughly $140 billion to $150 billion.
"By passing an effective growth package quickly we can provide a shot in the arm to keep a fundamentally strong economy healthy," said the president.
He said that his advisers believe the economy can keep growing, but that the risk of a downturn has convinced him to back a stimulus package.
"There are also times when swift and temporary actions can help ensure that inevitable market adjustments do not undermine the health of the broader economy," Bush said. "This is such a moment."
Treasury Secretary Henry Paulson, speaking after the president's remarks, said administration estimates find that the stimulus package would lead to about a half-million additional jobs being created.
Both Paulson and the president said they are confident the measure should be able to win support from both Democrats and Republicans.
But while the president did not lay out specifics of his plan in his prepared remarks, his proposals came under criticism by some leading Democrats even before he started speaking.
Sen. Hillary Clinton, D-N.Y., one of her party's leading candidates for president, said before the president's midday remarks Friday that "the Bush plan shortchanges the 50 million Americans who most need an economic shot in the arm.
"The Bush approach would fail to fully help the millions of lower-income senior citizens who live on fixed incomes and are under enormous financial stress," Clinton said. "And it would disproportionately leave out African American and Hispanic families who have, on average, lower incomes than white families."
Still the president's comments were praised by the House Speaker Nancy Pelosi, who pledged that Democrats would work with the administration to pass some kind of stimulus package.
"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 in her statement. "We have agreed on the need to provide assistance immediately, and Congress will continue to work with the administration to stimulate the economy in a way that is timely, targeted, and temporary."
Paulson said said that it was important to move quickly to get a significant amount of dollars into the hands of consumers.
"There are no silver bullets," Paulson said. "There's nothing that's perfect. There's plenty of evidence that if you give money to people quickly, they're going to spend it."
Paulson would not respond to questions about specific proposals that have floated around Capitol Hill in recent days, including an $800 rebate for every taxpayer, saying the administration stands willing to work with Congress on a proposal that follows the broad outlines talked about Friday.
"We intentionally don't want to be overly specific," Paulson said.
Soon after Bush took office in 2001, as the country struggled with a recession, the administration won approval for an economic stimulus package that included $300 rebates for individual taxpayers and $600 for couples filing joint returns. It also won short-term changes in the tax treatment of equipment purchases made by businesses, which spurred spending by businesses.
There is talk that those kinds of incentives for business purchases will be included as part of the new package. There are also proposals by Democrats to extend unemployment benefits that now expire after 26 weeks, to temporarily raise food stamp payments and possibly a holiday or rebate for payroll taxes that taxpayers pay into Social Security.
The president's remarks follow testimony before Congress Thursday by Federal Reserve Chairman Ben Bernanke in which he called for quick action on some form of economic stimulus. A week ago, the chairman had also pledged that the central bank stood ready to take "substantive additional action" to keep the economy from falling into a recession, a statement seen as a promise of further interest rate cuts.
There is growing belief among leading economists that a recession is likely this year, if it hasn't already started. And that fear of a recession is also growing among the general public.
A poll of 1,000 Americans conducted earlier this week for Fortune magazine showed three out of four Americans believe the economy is either already in a recession or will enter one this year. Those surveyed also supported a broad range of stimulus proposals.
Tax cuts for low and middle income taxpayers was favored by just over three of four surveyed. In addition, just over half also supported extending unemployment benefits, tax cuts for businesses and extending the tax cuts passed by the Bush administration in 2001 and 2003 that are due to expire by 2010.
While the president and Paulson both spoke in favor of making tax cuts permanent, they said that should be done after the short-term stimulus package is passed and signed into law. And the president spoke against one proposal favored by two-thirds of those surveyed by Fortune - an increase in government spending on public works.