Paulson sees cooperation on stimulus plan
Treasury Secretary says the economy is sound but that short-term risks require immediate action.
NEW YORK (CNNMoney.com) -- Treasury Secretary Henry Paulson said Tuesday he is confident the administration and Congress can work out a plan to stimulate the economy and expressed support for the Federal Reserve's decision to cut interest rates.
"There is no silver bullet that will deal with what's going on directly in the housing market," Paulson told policy insiders at the U.S. Chamber of Commerce in Washington. "We will see as the next couple of weeks unfold. They are going to be very important weeks."
The structure of the U.S. economy is sound, Paulson said, though he added that short-term risks to economic health are "clearly to the downside."
While Paulson was speaking, the Federal Reserve announced that it was cutting interest rates by three-quarters of a percentage point.
Paulson said the Fed's decision was "very constructive" and that it should help build confidence in the markets. "It shows the country and the rest of the world that our central bank is nimble and able to respond to market conditions," he said.
However, the Dow Jones industrial average opened 400 points lower Tuesday, following a steep selloff in overseas markets on Monday, despite the Fed's emergency rate cut and talk of economic stimulus.
Paulson's remarks came as President Bush is scheduled to meet with lawmakers from both parties to discuss a package to juice the faltering economy. Last week, Bush said his plan would encompass 1 percent of the nation's gross domestic product, or roughly $140 billion to $150 billion.
Paulson said that anything less than 1 percent of GDP will not have a "meaningful impact."
Some of the components of the plan being considered are tax rebates aimed at stimulating consumer spending, tax cuts for individuals and business and expansion of social services like food stamps and employment aid.
Paulson stressed that an economic stimulus plan must reach a large number of citizens and cautioned Congress that debates over favorite programs could bog the process down.
"By working together, we can disprove the old Washington axiom that partisan politics prevents most short-term growth packages from being enacted fast enough to do any good, " he said.