House Speaker Dennis Hastert decided Tuesday to press ahead with an economic stimulus package even though two of America's most respected financial leaders, Alan Greenspan and Robert Rubin, told senators they oppose key corporate relief measures in any such bill.
John Feehery, the speaker's press secretary, said the size of the package and the details had not been determined, but added that Hastert (R-Ill.) believes the extra stimulus is required to increase consumer and investor confidence since the Sept. 11 terrorist attacks.
In a meeting with the Senate Finance Committee, Greenspan, chairman of the Federal Reserve Board, and Rubin, a Treasury secretary in the Clinton administration, recommended against putting a capital gains tax cut and a corporate tax rate cut into a stimulus package, according to sources.
Greenspan said that while he has always favored reducing capital gains taxes as part of a longer-term restructuring of the tax code, cutting them as part of a short-term economic stimulus would not be a good idea, according to a source at the meeting.
As he did in a meeting with House and Senate leaders last week, Rubin spoke in favor of individual tax reductions as a way to stimulate the economy and spoke against business tax reductions, including a cut in the corporate rate and in capital gains taxes. Favored by Republicans, the corporate rate cut has been pushed by Treasury Secretary Paul O'Neill and some White House economic advisers.
Greenspan and Rubin said that if Congress decides to approve a stimulus package, it should total at least $100 billion over two to three years and be temporary. Meantime, as they did last week, they urged senators to wait a week or two to see how the economy is faring before deciding on whether to pursue a stimulus plan.
Speaker may wait short while
According to Feehery, however, Hastert told the GOP leadership Tuesday that he wants to go ahead with a stimulus package, though he will respect Greenspan's and Rubin's advice to wait a short while before putting all the elements together. The Hastert plan will include new tax measures, he said, and could include relief for people who lost their jobs as a result of the terrorist attacks.
Noting a plunge in the Conference Board's consumer confidence index in September, Feehery said the speaker believes the extra stimulus is needed to boost consumer and investor confidence.
The measure also could be used to help workers directly affected by the attacks, he said. Such proposals as extending unemployment insurance and paying a portion of the cost of the health insurance of jobless workers could be considered, along with an increase in the minimum wage, he said.
A wide array of tax reductions are being discussed, ranging from corporate tax rate cuts, a decrease in the capital gains tax, faster tax write-offs for business equipment and several individual tax-cut proposals. Hastert wants to hasten higher contribution limits for 401(k) and individual retirement accounts contained in the president's $1.35 trillion, 10-year tax cut.
According to one Democratic staffer in the House, the proposal for faster tax write-offs for business equipment is the one corporate tax relief measure that has the best chance of being included.
Tax cuts for individuals could include a decrease in Social Security payroll taxes or a rebate against these payroll taxes, sources said. Rubin favors tax relief for low-income Americans who did not receive tax rebates this year. People who had no tax liability did not receive the rebate.
Sens. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, and Charles Grassley (R-Iowa), the ranking Republican member, said no decision had been made on whether to go forward with a bill.
"I think it has to be temporary, but significant enough to make a difference," Grassley said.
The White House has a stimulus package under review, but congressional leaders who have met with Bush at the White House said it has not yet been mentioned by the president. O'Neill said last week he agreed with Greenspan that a week or two should pass before such a decision is made.
The latest consumer confidence numbers argue in favor of more economic stimulus, said Bill Cheney, chief economist at John Hancock Financial Services in Boston, as long as Congress can put money in the hands of Americans quickly. "When you throw enough money at us, we will spend it," he said.
According to the Conference Board, consumer confidence as measured by its index fell in September to 97.6 from a revised 114.0 in August. It included data collected before and after the Sept. 11 terrorist attacks. Not since the Persian Gulf war has the index dropped so much in one month.
Attacks cut projected surplus
The Congressional Budget Office told the Senate Budget Committee on Tuesday that the terrorist attacks and the economic slowdown may cut $120 billion from next year's projected budget surplus, leaving a surplus of about $50 billion.
In addition to an economic stimulus package, Democrats said they are pushing for assistance to workers hurt by the attacks in a separate bill, though it could be incorporated into a stimulus bill.
House minority leader Richard Gephardt (D-Mo.) introduced a bill Tuesday that would provide workers directly affected by the attack with new unemployment and health benefits. Sen. Jean Carnahan (D-Mo.) introduced the same measure in the Senate.
The legislation would provide unemployment insurance to affected workers who otherwise are not eligible for it and extend it for those who have it. The government would pick up the cost of the workers' share of health benefits for jobless workers, a program called COBRA.
"In the last two weeks, more than 100,000 workers in the airline and aerospace industries have lost their jobs," Gephardt said. "The list of occupations is long, that list is growing, and the number of people affected also continues to expand."
Also on Tuesday, another economic report showed that the U.S. poverty rate declined to 11.3 percent in 2000, its lowest level since 1974.
Median household income was $42,148 last year, down from the record high of $42,187 in 1999. The figure means half of the population earns more than this amount, and half less.
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