WASHINGTON - President Bush called on Congress yesterday to enact a package of up to $75 billion in tax relief for individuals, businesses and laid-off workers suffering from an economic slowdown made worse by last month's terrorist attacks.
After a period of rising surpluses, the president's proposal would put the federal budget into deficit for the first time since 1998. But with the economy seemingly sliding into recession as the nation prepares for war, Bush said the standard he had set during his presidential campaign for deficit spending had easily been met.
"We've now got a reason to do what it takes to not only provide security at home [and] to win the war on terrorism, but we've also got to do what it takes to make sure this economy gets growing so people can find work," he said at a meeting with business executives in New York - not far from the site of the destroyed World Trade Center.
"We've just got to be aggressive and make sure we do what we need to do," Bush said.
Bush's request for $60 billion to $75 billion comes on top of a $40 billion package of emergency aid for recovery and military efforts, and a $15 billion airline bailout plan, both of which Congress has approved.
Alan Greenspan, the Federal Reserve chairman, met with congressional leaders yesterday, urging them to act quickly to provide the economy with a further jumpstart, lawmakers said. Just two weeks ago, the Fed chairman had urged Congress not to act hastily on an economic stimulus plan.
"We all agree that our economy needs some help," House Speaker Dennis Hastert said after the meeting with Greenspan. "Both consumer confidence and investor confidence are down."
'We've got to be realistic'
Bush said his goal in offering his proposal was to provide the "parameters" for the effort in Congress to shape legislation that would provide quick relief to the economy without imposing a long-term burden on the federal budget.
Democrats were more enthusiastic about Bush's specific proposals than were Republicans.
Many Republicans favor a larger stimulus package, with permanent tax relief geared toward businesses and corporate investors who create jobs and wealth. But a consensus seems to be developing roughly along the lines the president suggested.
"I think the president has offered a framework for a bipartisan agreement," said Rep. Benjamin L. Cardin, a Baltimore Democrat who serves on the House Ways and Means Committee.
Cardin said he would prefer to avoid deficit spending by repealing portions of the Bush tax cut enacted this year that have not taken effect and are geared toward wealthier taxpayers.
But Senate Majority Leader Tom Daschle said that while he, too, would prefer to take such steps to avoid the return to red ink, he is resigned to the reality that a deficit can't be avoided.
"I think we've got to be realistic here," said Daschle, a South Dakota Democrat. "This is an emergency. I don't want to get hung up for weeks about finding offsets or opening up the tax-cut debate of last spring all over again."
Treasury Secretary Paul H. O'Neill told the Senate Finance Committee that he now expects the economy to show negative growth, when inflation is taken into account, in the current quarter. But O'Neill said the outlook could brighten in the fourth quarter if consumer confidence rebounds.
Bush deflected a question about whether the economy is already in a recession, saying that was a matter for economic statisticians to decide.
"Here's my attitude: One person laid off is one person too many," the president said. "And therefore, we've got to do what it takes to make sure that that person who got laid off is able to find work."
The size of Bush's stimulus proposal fell about midway in the range of plans being discussed on Capitol Hill. The president also chose a middle ground between the Democrats' insistence on helping low-income people and the Republicans' push for business tax relief and investment incentives.
As part of his package, Bush called for additional "tax relief to individuals to boost consumer confidence" beyond the $1.35 trillion in income tax cuts enacted last spring.
Administration officials say the president is open to a second round of rebate checks - similar to those mailed out this summer - that have been dubbed a "Christmas bonus" because they would arrive in time to encourage fourth-quarter holiday spending.
"We believe there ought to be more [tax relief] to make sure that the consumer has got money to spend - money to spend in the short term," Bush said.
Democrats have proposed that such checks - of perhaps $300 for individuals and $600 for couples - go to the 30 million Americans who did not receive the earlier checks because they earn too little money to pay income tax. The new round of rebates would be considered a credit against their payroll deductions for Medicare and Social Security.
According to a White House estimate, the cost of a "Christmas bonus" rebate would be about $16 billion.
Another way to get more money quickly into consumers' hands, Bush said in his meeting with business leaders, would be to accelerate the income tax rate cuts approved in the spring. Those cuts are scheduled to be phased in at the rate of 1 percentage point a year over the next three years.
Republican lawmakers generally favor this approach over the rebate, which most Democrats prefer.
The president also called for aiding businesses to encourage investment and job creation. He mentioned several possible components: increases in tax deductions for business expenses; accelerated depreciation schedules; investment tax credits; and corporate tax cuts.
Those proposals mirror ideas being offered on Capitol Hill. Bush said he was confident that he and congressional leaders are "coming together on a plan that I believe needs to get passed as quickly as possible."
To aid the many workers who lost their jobs in the aftermath of the terrorists attacks, the White House has signaled that Bush would consider a 13-week extension in unemployment benefits beyond the usual 26 weeks. The aid might be targeted to states most affected by the layoffs.
Democrats also hope to add to the package money that would provide the displaced workers with health insurance and job training.
Some Republicans complained yesterday that by proposing to direct so much aid to low-income workers, Bush seemed more interested in crafting a package that could win Democratic support in Congress than one that would stimulate the ailing economy. They argue that a one-time income tax rebate would be less likely to boost spending than would a permanent reduction in taxes for individual and businesses.
"I understand that we have to buy a stimulus package," said Sen. Phil Gramm, a Texas Republican. "But we are getting very close to putting together a stimulus package that has no stimulus and one that I won't vote for."
Rep. Bill Thomas, a California Republican who is chairman of the Ways and Means Committee, added that he believed the rebate proposal would do little to invigorate the economy.
"This is not a fairness package," he said.
Greenspan's meeting yesterday with legislative leaders included Robert E. Rubin, who was Treasury secretary under President Bill Clinton, and Lawrence B. Lindsey, Bush's chief economic adviser. Much of the discussion centered on how much of the stimulus package should be allocated to tax cuts and how much to additional government spending, aides said.
In any case, the discussion was a far cry from the debate under way just days before the attacks Sept. 11. Then, Democrats complained that the federal government seemed about to dip into Social Security revenue, to take about $2 billion, for the first time in two years.
Since then, the Social Security surplus for 2002 has shrunk from about $174 billion to $52 billion. By next spring, the federal budget is expected to be deeply in red ink, Republican aides said.Copyright © 2014, The Baltimore Sun