Agreeing with the analysis that the American economy does face the risk of falling into a recession, President Bush on Friday called for $145 billion worth of tax relief in order to give the economy what he termed as a "shot in the arm."
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Bush said such a growth package must also include tax incentives for business investment and quick tax relief for individuals.
To be effective, he said an economic stimulus package would need to roughly represent 1 percent of the gross domestic product - the value of all U.S. goods and services and the best measure of the country's economic standing.
"There is a risk of a downturn," the President said in his remarks at the White House.
While Bush focused solely on taxes, congressional leaders have been trying to come up with a broader economic package. The legislation would also include a short increase in food stamps and an extension of as well as a possible increase in unemployment benefits.
Economists say a severe slump in the housing market and the painful credit crisis could cause people to close their wallets. In addition, businesses might put a lid on hiring, throwing the country into its first recession in seven years.
Bush said that Congress and the administration need to settle on a temporary economic package that could be implemented quickly to "keep our economy growing and create jobs."
"Letting Americans keep more of their money should increase consumer spending," he said.
"Must Not Include Tax Increases"
Bush outlined several criteria for the package to meet: It must be "big enough to make a difference in an economy as large and dynamic as ours," it must be built on "broad-based tax relief," it must take effect right away but be temporary, and it must not include any tax increases.
Specifically, he called for tax incentives for businesses, including small companies, to make new and major investments this year.
"Giving them an incentive to invest now will encourage business owners to expand their operations, create new jobs and inject new energy into our economy in the process," Bush said.
He also called for tax relief for individuals - probably to come in the form of one-time rebates. But he did not say how much money Americans would get to keep or the amount of other tax incentives that could be part of the package.
"Americans can spend this money as they see fit: to help meet their monthly bills, cover higher costs at the gas pump, pay for other basic necessities," he said.
Reducing Economic Fears
Congressional insiders, both Democrat and Republican, say the tax relief package could total from $100 billion to $150 billion. The president did not give details on how the country would pay for the measure.
Speaking for about seven minutes, Bush called passing a growth package "our most pressing economic priority."
He also addressed Americans fears about the struggling economy.
"We're in the midst of a challenging period," Bush said. "And I know that Americans are concerned. But our economy has seen challenging times before. It is resilient."
Treasury Secretary Henry Paulson,said 1 percent of GDP would equate to $140 billion to $150 billion, which is along the lines of what private economists say should be sufficient to help give the economy a short-term boost.
Paulson said the largest part of the stimulus package would be targeted to individual taxpayers.
"The cost of not acting has become too high," Paulson said. "We must act now." He also said the plan Bush spoke about would be the stimulus to create 500,000 additional jobs this year.
Sources: Associated Press, ABC News