Bush Ponders Jobless Aid Extension, Tax Cuts to Jolt Economy

President Bush is considering a proposed extension of unemployment benefits, along with another round of tax cuts, as part of a new economic stimulus plan, the White House said Friday.

The review of stimulus options proceeded as the White House and Congress neared agreement on a $686-billion package of spending bills containing $25 billion more than Bush had sought. Agreement would avert the usual year-end battle over federal spending.

White House Press Secretary Ari Fleischer said Bush was meeting with advisors to discuss the possibility of including a “worker-relief component” in any stimulus package developed in collaboration with Congress.

Fleischer said no final decisions had been made on whether to proceed with a stimulus package or what it would contain. Even so, the discussions are another sign of growing momentum to craft some kind of plan to combat a recession that has not been declared but which many economists believe already has begun.

“The president has had a series of meetings on a stimulus package,” Fleischer said. “A component that is also being explored is a worker relief component.”

Addressing the budget negotiations, Fleischer said the White House and Congress were “getting very close on the level of funding,” although he noted that “the talks continue.”

An agreement on the federal budget for fiscal year 2002, which begins Monday, would move Congress closer to clearing its plate of routine legislative business at a time when lawmakers are eager to focus on a response to the Sept. 11 terrorist attacks on New York and the Pentagon.

Indeed, the deal is taking shape amid signs that a number of items that dominated the legislative calendar until weeks ago--including campaign finance reform, patients’ rights and bankruptcy reform--will be put off until next year.

“There are clearly a number of priorities for both parties that have been postponed,” said Jay Carson, a spokesman for Senate Majority Leader Tom Daschle (D-S.D.). “It’s still too early to say how long it will take Congress to deal with the number of emergencies that have come about as a result of the attacks on Sept. 11.”

The budget determines how much the government will spend in the forthcoming fiscal year on programs and departments ranging from education to the military. It does not include funding for entitlement programs, such as Social Security and Medicare.

The pending deal reflects how much has changed on Capitol Hill from just a few weeks ago, when lawmakers were bickering over whether to dip into the Social Security surplus to cover greater-than-expected government spending.

At a time when tax receipts are plummeting, the new figure is about 4% higher than the $661-billion ceiling adopted by Congress in its May budget resolution, which set out the administration’s initial proposal.

The financial terms of the deal are all but done, according to congressional sources, but the agreement has snagged over lawmakers’ demands that Bush submit the budget in writing.

Democrats are said to be particularly insistent on this point because they do not want the jump in spending to be used against them as a campaign issue in next year’s elections.

Of the increase, $18.4 billion is to be earmarked for defense, $4 billion for education and $2.2 billion for responses to natural disasters, including recent forest fires in California.

Few in Washington expect the new spending cap to hold for long. Daschle and others have already warned that the cost of repair and recovery at the World Trade Center and the Pentagon will soar well beyond the $40 billion approved two weeks ago.

There is also pressure to bolster the nation’s defense and intelligence infrastructure and the prospect of emergency spending bills to pay for military operations.

Fleischer’s comments Friday were the first public indication that Bush may back a benefits package for unemployed workers, including the hundreds of thousands in the airline, hotel and related industries who lost their jobs as a result of the attacks.

“The president is very concerned about the rising unemployment [rate],” Fleischer said. “The president wants to address that by working with the Congress in a bipartisan way on an economic stimulus package.”

Bush is scheduled to meet with Daschle, House Speaker J. Dennis Hastert (R-Ill.), House Minority Leader Richard A. Gephardt (D-Mo.) and Senate Minority Leader Trent Lott (R-Miss.) at the White House on Tuesday morning.

Gephardt said Friday that he favored extending, for at least several months, unemployment and health-care benefits to workers who lost their jobs.

“It’s as much an emergency as anything else,” Gephardt said. Democrats, he said, “are going to insist that we deal with it.”

At least one domestic issue unrelated to the terrorist attacks seems likely to be addressed: education. Leading lawmakers have pledged to get education reform legislation, now in a House-Senate conference committee, to the president’s desk by the end of the year.

The goal of that legislation is to demand better results from languishing public schools in return for more federal education spending.

This week, for instance, congressional negotiators agreed to a Bush proposal to triple federal funds for reading instruction, from $300 million to $900 million a year.

Jim Manley, a spokesman for one of the negotiators, Sen. Edward M. Kennedy (D-Mass.), said talks could last two more weeks.

While the new budget accord calls for a $4-billion increase in annual federal spending on education, Manley indicated that Kennedy might push for an even larger amount.

Democrats contend that the government should not burden local schools with strict new testing and accountability standards without giving educators the means to improve.

Many Republicans say that school systems are wasting much of the money they already receive.

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Times staff writer Nick Anderson contributed to this report.