Bush and Congress join hands to revive economy
U.S. STIMULUS PACKAGE
They set aside partisan differences to rush out $216b stimulus package.
JOLTED by global recession fears, US President George W. Bush and leaders of Congress have joined hands in a rare show of cooperation, promising urgent action to pump up the economy with upwards of US$150 billion (S$216 billion) in tax cuts and government spending.
As markets roiled from a sharp sell-off around the world and the Federal Reserve scrambled to slash US interest rates by three-quarters of a percentage point – the largest cut in more than 23 years – Mr Bush met senior lawmakers on Tuesday to work out a compromise on tax breaks for consumers and businesses.
“All of us understand that we need to work together. All of us understand that we need to do something that’ll be effective. And all of us understand that now’s the time to work together to get a package done,” he said after the meeting at the White House.
The package, to be out within weeks, is expected to offer rebates of US$800 for individuals, bonus depreciation to allow companies to deduct 50 per cent of business investments made this year as well as boosts in unemployment benefits and food stamp payments for the poor and disabled.
White House spokesman Dana Perino disclosed that the administration was open to the possibility of a larger package, saying that Mr Bush was “not closing any doors”.
The current plan could help “avoid a potential downturn”, she said. She made clear Washington was not forecasting a recession, which many observers believe the US could face.
For Mr Bush, the economy now looms far larger as a potential crisis in his final year in office, when he had expected to remain focused on Iraq, Iran and the prospect of Middle East peace.
His plan – first mooted five days ago before the stock markets in Asia and Europe started plummeting – has produced some of the most striking bipartisanship of his presidency.
Both Democratic and Republican lawmakers emerged from the talks vowing to pass the package before Congress breaks for a holiday on Feb 18.
“This week’s downturn in the global markets demonstrates how urgently we need to act to revive our nation’s faltering economy,” Senate Democratic Majority Leader Harry Reid said.
“I really feel good that we have the opportunity to do something together. We want this stimulus package to be dealing with the problems of the American people, not ideology.”
The Democrats appeared to be torn initially between compromising with the administration and blaming it for its lethargic response. But the party leadership was impressed with Treasury Secretary Henry Paulson’s willingness to compromise.
In the past, treasury secretaries could not budge because of stiff opposition from conservatives.
The conservatives – in editorial pages of The Wall Street Journal and The Weekly Standard – were making their views loud and clear. They scorned one-time tax rebates to individuals as ineffective pandering and called for permanent breaks aimed at drawing investment.
The liberals also joined in the fray. They argued that Mr Bush’s proposed package favoured the rich.
Democratic Senator Edward Kennedy said on the Senate floor: “We’ve tried tax rebates before, but they haven’t worked as well as they should because previous rebates left out those at the very bottom of the economic ladder – the families struggling every day to pay their bills, heat their homes and pay their mortgages.
“Now the President wants to do the same thing again. He’s proposed a tax break in his stimulus package that would completely leave out the poorest Americans.”
Analysts believe the rescue package might be too late to avert an impending recession at home.
Lowering interest rates or passing a stimulus package may not be enough. People and investors may want to see something more concrete – lower unemployment or higher retail spending, for example.
But the economy is dealing with a huge unknown: the ultimate magnitude of the housing crash and credit crunch.
Washington Post columnist Robert Samuelson said the Bush plan was intended only to distract US consumers from their pain, like giving sweets to a crying child.
“It’s an election year. Voters feel anxious about a weakening economy,” he wrote. “Send them economic lollipops – say, a US$500 tax rebate for most families. Make them feel better. Show them you are concerned. Prove that you are trying to improve the economy.”