Skip to content
Bush offers $60 billion plan to reignite economy
President Bush urged swift congressional approval Wednesday of an economic stimulus package of $60 billion to $75 billion to boost damaged consumer and business confidence and assist Americans directly affected by the Sept. 11 terrorist attacks.
The package's size topped the $50 billion recommended by Senate Majority Leader Tom Daschle (D-S.D.) and underscored that the administration eagerly wants a quick and large infusion of new money into an economy that Treasury Secretary Paul O'Neill conceded could sink into a recession.
"I know there are people hurting in America," Bush said after addressing business leaders in New York, adding that "one person laid off is one person too many." He said he wanted to assure businesses that "the government is playing a very active role and that we will take the steps necessary to provide growth and stimulus," even if it means going back into deficit spending.
In a later meeting with congressional leaders, Federal Reserve Board Chairman Alan Greenspan endorsed approval of a stimulus package, said a spokesman for House Speaker Dennis Hastert (R-Ill.). A week ago, Greenspan had counseled Congress to wait a week or two before considering such a step.
Speaking to the Senate Finance Committee, O'Neill sketched the outline of a package that includes accelerating Bush's individual tax-rate cuts scheduled to go into effect in 2004, providing business with investment tax credits or more generous tax write-offs for equipment they buy, and extending unemployment insurance beyond the current 26 weeks.
The secretary also endorsed a Democratic-inspired idea of tax rebates for lower-income workers who did not receive a rebate check this year, possibly as a credit against their Social Security payroll taxes, but he said the administration opposed cutting the Social Security payroll tax directly.
O'Neill said the administration wants to help Americans hurt by the attacks with new "national emergency grants" that would be shipped to governors. The funds could be used for special assistance for laid-off workers who may need help in paying for health insurance, or for other needs, including perhaps highway repairs, the secretary said.
Bush's plan would be on top of a $40 billion anti-terrorism bill approved earlier to deal with the crisis, including cleaning up New York, as well as a $15 billion airline bailout bill. In addition, the government already has sent out $40 billion in tax rebate checks this year.
The stock market rose for a second day in a row with the announcement of Bush's plan. The Dow Jones industrial average of blue-chip stocks was up 173.19 points to close above the 9,000 level for the first time since the markets reopened after the attacks, and other measures of stock values rose as well.
In presenting the plan, O'Neill ran into the first political resistance to the kind of package the administration wants to see emerge from Congress. Several Republicans said they were disappointed the plan did not include enough stimulus for business investment, considered key to providing new jobs. They also thought the president should recommend that the $1.35 trillion, 10-year tax cut be made permanent.
Sen. Phil Gramm (R-Texas) said he might not vote for the package if the president's tax-cut plan, which expires in 2011 unless Congress acts, is not made permanent. Gramm said such a move alone would do more to stimulate the economy than all the other measures on the table. But O'Neill declined to support that step, considered highly controversial among Democrats.
Sen. Don Nickles (R-Okla.), the No. 2 GOP leader in the Senate, took O'Neill to task over the president's willingness to consider an increase in the minimum wage. The senator said that a higher minimum wage would increase unemployment.
Sen. Fred Thompson (R-Tenn.) said, "We are going to wind up with a big package that is not stimulative at all." He said the package should be tilted more heavily toward business, not consumers, because lagging business investment is behind the economic slowdown and widespread layoffs.
O'Neill said the economy will decline in the third quarter and could do so again in the fourth quarter, meeting the technical definition of a recession, unless consumer confidence rebounds faster than expected in response to government actions to spur the economy and provide new protections against terrorism.
In New York, Bush said it was up to statisticians to declare a recession. Presidents traditionally have been reluctant to admit the country is in a recession, not only because it could hurt confidence but also could inflict political damage.
Some see rebound already
Even as he sought quick approval of the stimulus package, O'Neill cast some doubt on the need for the extra stimulus by saying that recently there have been signs of a revival of economic activity. "In the past week, it appears we are regaining our economic footing," he said.
The treasury secretary said consumers are returning to stores, people are beginning to take airline trips "and there are buyers again for big-ticket items," including automobiles and light trucks, which he said could have the third-best year ever in 2001.
Economists believe the nation is in a recession that could last until the middle of next year. Most think it will be relatively mild, although some analysts fear it could be severe as layoffs resulting from the attacks create worker anxiety and cause consumers to retrench. The secretary said the jobless rate, at 4.9 percent in August, will be higher in September and October. September's unemployment rate will be announced Friday.
Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, emphasized that the stimulus measure must be passed with bipartisan support, but several GOP members expressed reservations about Baucus' ideas for a rebate against payroll taxes and for government subsidies to help laid-off workers pay for their health insurance.
Bush and O'Neill did not lay out a detailed stimulus plan, chiefly because the administration wants a bipartisan bill to emerge from Congress. Judging from Wednesday's committee hearing, some fierce battles may be ahead over the shape of the measure.
O'Neill strongly pushed the administration's priorities, and at the top were business investment incentives and moving up the effective date of individual tax rate cuts now scheduled to take effect in 2004.
The treasury chief said as much as $25 billion could be set aside to make these tax rate reductions effective in 2002. This measure would give the economy extra zip without having a major budgetary impact over the long run, he said. Bush and O'Neill said they want to guard against adding significantly to the deficit over the long run for fear of driving up long-term interest rates.
Many of the provisions in the stimulus package would be temporary. As for the package as a whole, O'Neill said the measures should be effective retroactive to Sept. 11.