Bush seeks emergency boost for US economy

Jan 18, 2008, 20:09 GMT

US President George W. Bush (R), makes a statement on the economy in the Roosevelt Room of the White House as Vice President Dick Cheney (L), looks on, in Washington, DC, USA, 18 January 2008. EPA/Tripplaar/ POOL

Washington - President George W Bush on Friday proposed some 140 billion dollars in emergency tax relief to boost the flagging US economy and avoid a recession, warning that the nation faces the 'risk of a downturn.'

Outlining his vision of an economic stimulus package, he urged steps to spark consumer spending - the engine of the US economy - and said the measures would have to be worth about 1 per cent of gross domestic product to make an impact.

'We're in the midst of a challenging period, and I know that Americans are concerned about their economic future,' Bush said at the White House. 'But our economy has seen challenging times before, and it is resilient.'

Most likely, the package will include a one-time income tax rebate to put more spending money in Americans' pockets. Bush said he is confident he can reach a deal with Congress, where the opposition Democrats hold the majority.

Democratic leaders welcomed Bush's announcement. US Senator Charles Schumer, a leading Democratic spokesman on the economy, said the stimulus package could take effect as early as March 1.

But in a sign of tough negotiations ahead, he said it should also include higher government spending, such as temporarily extending the time that jobless insurance benefits are paid.

'The president left out spending stimuli, and we hope that he will move to include them,' Schumer told reporters.

The ailing economy risks clouding Bush's last year in the White House before his term ends next January. Recession fears are rippling into the 2008 presidential election campaign as Democratic and Republican candidates jostle to present plans to bolster the economy.

Bush acknowledged that the economy is cooling because of slowing job creation, higher oil prices and a housing-market slump.

'And there is a risk of a downturn,' he said. 'Passing a new growth package is our most pressing economic priority.'

His proposal focussed on tax relief for businesses and individuals to spur investment and consumer spending. Consumer spending makes up about two-thirds of the US economy, the world's largest.

Many experts believe the 14-trillion-dollar US economy is headed for - or has already begun - a recession. The Bush administration insists the country is headed only for slower growth, but Treasury Secretary Henry Paulson acknowledged there was no easy fix.

'There are no silver bullets. There's nothing that is perfect,' he told reporters.

Bush's remarks failed to stop the slide in US stocks, which opened the day higher, then fell.

The US economy grew at a nearly 5-per-cent annual rate in the third quarter of 2007, but economists believe it slowed sharply in the last three months of the year.

'A huge part of this is going to be speed, getting money out quickly,' Paulson said. The bulk of tax relief should be aimed at consumers, he said.

A key goal is to dampen the fallout from the subprime mortgage meltdown and the collapse of a home-price bubble that helped finance consumer spending, which Paulson blamed on years of 'unsustainable' price rises in the real-estate market.

On Thursday, US Federal Reserve chief Ben Bernanke backed short- term government action to boost the economy.

Independently of the administration, the central bank is expected to cut US interest rates further at its next decision meeting on January 30. Lowering the cost of borrowing can spur investment and consumer spending.

Bush had been expected to present his ideas for a stimulus package in his January 28 State of the Union speech, but the Democratic-led Congress stepped up calls for action while Bush was abroad on a Middle East trip last week.

'We have an opportunity to do it sooner and the president sees no reason to wait for' the annual policy speech, White House spokesman Tony Fratto said.