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Looking for just the right jolt
With layoffs mounting and the economy quickly sinking toward recession, President Bush and congressional leaders pledged Wednesday to develop a new economic stimulus package likely to include tax relief and spending increases.
In a bipartisan meeting with congressional leaders, the president said America faces tough economic times as a result of last week's terrorist attacks and that he is prepared to use as much of the Social Security surplus as required to get the country going again.
He gave no details of what the package might include, although Republicans have been talking of a capital gains tax cut and new tax incentives to help businesses write off most of the costs of their investments. Democrats have been urging a reduction in Social Security payroll taxes or broadening the tax rebate program approved earlier this year.
House Speaker Dennis Hastert (R-Ill.) said final decisions on the package have not been made, adding that he and other leaders had talked about "taking our time and doing things right" rather than rushing a stimulus package through Congress.
In a summit in Hastert's office before the Bush meeting, Federal Reserve Chairman Alan Greenspan urged Congress to wait at least a couple of weeks before approving a stimulus plan so that a clearer post-attack picture of the state of the economy would be available.
Greenspan's advice influenced Hastert and House Democratic Leader Richard Gephardt (D-Mo.), said those familiar with their views. "The speaker wants to take a step back," said one of Hastert's advisers. The Federal Reserve chairman has reduced interest rates eight times this year, the last coming Monday. He may cut interest rates again Oct. 2, according to economic analysts.
Other calls for patience
Echoing Greenspan, Treasury Secretary Paul O'Neill said Wednesday during "The News Hour with Jim Lehrer" that Congress should wait 10 days to two weeks before passing a stimulus package.
Robert Rubin, Treasury secretary for President Bill Clinton, appeared to be offering the same counsel of caution, saying, according to one source, "We've got a $40 billion stimulus package that hasn't even been implemented yet." Rubin referred to a bill signed by Bush this week that would provide funds for the New York cleanup and fund anti-terrorism measures.
Nevertheless, an air of urgency surrounded development of a new economic package to respond to the dramatically slowing economy. Layoffs have rocked the airline industry, but hotels and the travel industry have also been slammed by the fear engendered by the attacks.
Retail stores are reporting slow sales, although official numbers are not in on how much they have been affected. The Dow Jones Industrial Average closed down 144.27 points Wednesday at 8,759.13.
Greenspan's aggressive campaign of interest-rate reductions has shaved the benchmark Fed interest rate, which banks charge each other for overnight borrowing, to 3 percent. The Fed's interest-rate decreases have failed to revive the economy from its slump, and tax rebates under Bush's plan have not produced a rebound either.
Job losses in the aviation industry continued to mount. American Airlines said Wednesday that it would lay off an estimated 20,000 workers, bringing to nearly 110,000 the number of aviation job losses announced since the attacks. A separate $17.5 billion measure is being considered by the House to help rescue the industry.
Late Wednesday, an administration official said Bush would ask Congress to give the nation's airlines $5 billion in immediate cash aid plus help with their insurance liability as part of that rescue package.
"The financial damage is and continues to be devastating," Delta Air Lines Chairman Leo Mullin told the House Transportation Committee.
The airline rescue bill could pass the House this week, although Democratic lawmakers said they will push for some type of assistance for the newly laid-off workers, such as extending unemployment compensation for what one Democratic staff member called "the guys with the lunch pails."
Bush also said he would work with Congress to deal with what he called an economic emergency.
"This is an emergency the likes of which we have not seen in a long time ... and the government will come together and deal with it," Bush said.
Earlier, White House spokesman Ari Fleischer said the package could include tax relief and spending increases, as well as regulatory changes that would help business, although he gave no details.
Democratic leaders indicated they would work with the president to develop the stimulus package, as well as to clear the airline rescue package. At the same time, while partisanship has been squelched, the GOP and Democrats have different approaches to cutting taxes.
In the Hastert meeting, for example, Lawrence Lindsey, the president's chief economic adviser, said the stimulus package should contain corporate tax relief, according to an official familiar with the discussions.
Rubin emphasized he would like to see a consumer-oriented tax cut, such as providing rebates to low-income people who did not get them this year. The idea was received coolly by the GOP leadership.