Administration Considering a Possible Economic Stimulus Package to Ward Off Recession.
The Bush administration, faced with a deteriorating economy and a big jump in unemployment, said Friday it was considering an economic stimulus package that might include tax cuts to ward off a recession.
On Friday, the Labor Department reported that unemployment was at a two-year high of 5 percent in December, while employers clamped down on hiring for the month. The amount of new jobs employers added to their payrolls was at a four-year low.
Officials stressed that President Bush has not decided yet to offer a proposal but was looking at a variety of options with a plan possibly being unveiled around the time of his Jan. 28 State of the Union address. "The president is always looking at options ... always talking to people and looking at data," Commerce Secretary Carlos Gutierrez said.
Bush met Friday with top economic officials including Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, who are part of the president's working group on financial markets, a group formed after the 1987 stock market crash to monitor markets.
The president was given an assessment of how the economy is behaving and how financial markets are performing after the severe credit squeeze that hit in August. A number of big financial institutions have declared multibillon-dollar losses because of rising defaults in the subprime mortgage market.
White House spokesman Tony Fratto said tax cuts were an option being considered. Bush in his first term included a tax refund of up to $300 per person to combat the impact of the 2001 recession. Private economists said another round of tax cuts would be the best approach to get money to people who would spend it.
Some suggested a one-year tax rebate of $500 might provide a sufficient shot-in-the-arm for the economy. But they stressed that the proposal would have to be passed quickly. "The critical time is the first part of this year. If it doesn't get passed until just before the November election, it will be totally useless," said David Wyss, chief economist at Standard & Poor's in New York.
Dan Danner, executive vice president for public policy for the National Federation of Independent Business, said his group and other business organizations will be lobbying for tax incentives to be included in any stimulus package. "We are very hopeful that as the administration looks at economic stimulus, they will look at the sector that has helped keep the economy afloat and that is small business," Danner said.
Former Treasury Secretary Lawrence Summers, who served in the Clinton administration, said in a speech last month that a stimulus package of $50 billion to $75 billion of temporary tax cuts and emergency spending would be needed to avoid what he said could be the worst recession since the steep 1981-82 downturn.
It was expected that Bush would combine any new tax cuts with a renewed call to make permanent his first term tax cuts, which are now scheduled to expire at the end of 2010. He warned Congress against taking steps that would increase taxes. "The worst thing that Congress can do is raise taxes on the American people and on American businesses," he said.
Analysts said any stimulus package should provide only temporary tax relief to avoid making budget deficits worse in future years. The quickest help probably will come from the Federal Reserve, in the form of another interest rate cut later this month. That was considered more likely given the jump in unemployment in December, to a two-year high of 5 percent.
Bush urged Congress to quickly pass legislation left over from last year to offer assistance to people trying to obtain mortgages or refinance to more affordable mortgages. "For those of you who are paying more and are worried about the value of your home, I understand that," he said.
The Bush administration, faced with a deteriorating economy and a big jump in unemployment, said Friday it was considering an economic stimulus package that might include tax cuts to ward off a recession.
On Friday, the Labor Department reported that unemployment was at a two-year high of 5 percent in December, while employers clamped down on hiring for the month. The amount of new jobs employers added to their payrolls was at a four-year low.
Officials stressed that President Bush has not decided yet to offer a proposal but was looking at a variety of options with a plan possibly being unveiled around the time of his Jan. 28 State of the Union address. "The president is always looking at options ... always talking to people and looking at data," Commerce Secretary Carlos Gutierrez said.
Bush met Friday with top economic officials including Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, who are part of the president's working group on financial markets, a group formed after the 1987 stock market crash to monitor markets.
The president was given an assessment of how the economy is behaving and how financial markets are performing after the severe credit squeeze that hit in August. A number of big financial institutions have declared multibillon-dollar losses because of rising defaults in the subprime mortgage market.
White House spokesman Tony Fratto said tax cuts were an option being considered. Bush in his first term included a tax refund of up to $300 per person to combat the impact of the 2001 recession. Private economists said another round of tax cuts would be the best approach to get money to people who would spend it.
Some suggested a one-year tax rebate of $500 might provide a sufficient shot-in-the-arm for the economy. But they stressed that the proposal would have to be passed quickly. "The critical time is the first part of this year. If it doesn't get passed until just before the November election, it will be totally useless," said David Wyss, chief economist at Standard & Poor's in New York.
Dan Danner, executive vice president for public policy for the National Federation of Independent Business, said his group and other business organizations will be lobbying for tax incentives to be included in any stimulus package. "We are very hopeful that as the administration looks at economic stimulus, they will look at the sector that has helped keep the economy afloat and that is small business," Danner said.
Former Treasury Secretary Lawrence Summers, who served in the Clinton administration, said in a speech last month that a stimulus package of $50 billion to $75 billion of temporary tax cuts and emergency spending would be needed to avoid what he said could be the worst recession since the steep 1981-82 downturn.
It was expected that Bush would combine any new tax cuts with a renewed call to make permanent his first term tax cuts, which are now scheduled to expire at the end of 2010. He warned Congress against taking steps that would increase taxes. "The worst thing that Congress can do is raise taxes on the American people and on American businesses," he said.
Analysts said any stimulus package should provide only temporary tax relief to avoid making budget deficits worse in future years. The quickest help probably will come from the Federal Reserve, in the form of another interest rate cut later this month. That was considered more likely given the jump in unemployment in December, to a two-year high of 5 percent.
Bush urged Congress to quickly pass legislation left over from last year to offer assistance to people trying to obtain mortgages or refinance to more affordable mortgages. "For those of you who are paying more and are worried about the value of your home, I understand that," he said.
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