WASHINGTON — WASHINGTON -- The White House and congressional leaders accelerated talks yesterday on a plan to protect the U.S. economy from the risk of recession, with upheaval in overseas markets adding urgency to an effort that both sides hope to finish within weeks.
As international stock exchanges fell sharply early yesterday, the Federal Reserve moved to offset a similar downturn here by lowering its benchmark federal funds interest rate by three-quarters of a percentage point even before Wall Street opened. After plunging 465 points early in the day, the Dow Jones industrial average recovered and finished the session down 128 points, closing at 11,971.19.
Financial worries were palpable in Washington, where lawmakers agreed that the Federal Reserve's monetary policy adjustments might not sufficiently stabilize the economy.
Democratic and Republican leaders expressed broad agreement yesterday that rapid government action through tax rebates and business incentives is needed to help families and companies ensnared by the economic slowdown. But officials said it could take months before checks are issued.
"We may not know the exact answers, but we know that everybody's nervous and that the sooner we do something, the better, if it needs to be done," said Sen. Charles E. Grassley, an Iowa Republican on the Senate Finance Committee.
With the Senate back in Washington for the first time this year, negotiations were continuous yesterday over the shape of a stimulus plan.
Rep. Chris Van Hollen, a Montgomery County Democrat, said the elements of a package were forming and could include individual tax rebates, assistance to businesses and an extension of unemployment benefits.
"Those general categories are all on the table, but there is a lot of work to do with respect to the details," said Van Hollen, a member of the tax-writing House Ways and Means Committee.
House and Senate leaders from both parties insisted that they would work together, and with the White House, on a final plan.
The "message that is sent to the American people about bipartisanship, at a time when they are feeling the financial pain, will instill confidence in the consumer and, hopefully, in the markets as well," said House Speaker Nancy Pelosi, a California Democrat.
Senate leaders said they hope to receive a tax package from the House and approve it in about three weeks -- before the Presidents Day recess in February. "That, by the standards of Congress, is pretty fast," said Senate Minority Leader Mitch McConnell, a Kentucky Republican.
Meetings took place throughout the capital on how Washington should help. Treasury Secretary Henry M. Paulson Jr. convened with legislative leaders from both parties, who met with Bush at the White House later in the day.
"I think there is a sense that there is agreement on parameters, but of course, the details are important, and are usually what causes us to take some time to get to agreement," House Majority Leader Steny H. Hoyer of Maryland said in an interview after the meeting with Bush.
The president has emphasized temporary, limited relief through tax rebate checks and business tax breaks to prompt investment, with a total package costing about $145 billion -- or roughly 1 percent of the nation's gross domestic product.
But Bush's outline of a stimulus package last week did not prevent stock markets from Asia to Europe from plunging precipitously this week, forcing Washington leaders to reconsider whether the proposed intervention was sufficient.
Asked if Bush would consider a larger package, press secretary Dana Perino said "the president remains open, and he is not going to close ... any doors."
Democrats are pushing for other elements -- including money for lower-income workers who do not earn enough to pay federal income tax, and more funding for unemployment insurance and food stamps. The White House and Republican lawmakers did not rule out those elements yesterday but gave little indication as to what might be included in a final plan.
Problems in the U.S. mortgage market seem to have spread to other sectors of the economy, and unemployment has risen while the costs of energy, food and other consumer goods are on the rise. While some economists are predicting slow growth in the first half of the year, there is no agreement that the economy is heading for or is in recession -- defined as negative growth for two consecutive quarters.
Lawmakers say the White House has endorsed tax rebates of $800 per person or $1,600 per family, along with business incentives such as accelerated equipment depreciation timetables to encourage investment.
Some legislators worried that the proposed solutions might not be implemented in time to help the economy, while increasing the deficit and worsening inflation.
By returning money quickly to taxpayers, "you get consumption, but since so much of our consumption is based on overseas purchasing, are you going to be energizing the American economy or the Chinese economy?" asked Sen. Judd Gregg, a New Hampshire Republican.
"And as a very practical matter, if we put debt on the books ... then that debt compounds, and becomes not a one-time debt event, it becomes a generational debt," he said.
But Sen. Benjamin L. Cardin, a Maryland Democrat, said rebate payments could help a middle- income family that has been holding off on buying a refrigerator or going on vacation. A check from the government "really changes decision-making," he said.
Peter R. Orszag, head of the nonpartisan Congressional Budget Office, confirmed to lawmakers yesterday that the Internal Revenue Service could not begin processing rebates until after the April tax-filing deadline, and that checks would be sent about two months later, meaning that families would not get the money until summer.
Judging from experience, about a third of the rebates would be spent in three months, and another third in about six months, Orszag said.
Orszag said that payments to lower-income families and extensions of unemployment benefits and food stamps flow into the economy most quickly, while experience with business tax breaks in 2001 and 2002 suggests "some caution in our expectations about their effectiveness."
Debate over economic assistance is also infusing presidential campaigns. Sen. Hillary Rodham Clinton, a New York Democrat, called yesterday on the president to agree to send payments to those who do not pay income tax, saying to do otherwise would be "incredibly short-sighted."
"We have 50 [million] to 70 million people who are seniors on fixed incomes, who are working people who don't make enough money to actually pay income tax, [and] they have to get some help," she said.
Sen. Barack Obama, an Illinois Democrat, said the federal government "should send each working family a $500 tax cut and each senior a $250 supplement to their Social Security check. And if the economy continues to decline in the coming weeks, we should do it again.
"This is the quickest way to help people pay their bills and get them to start spending," he said.