Jan 22, 2008 3:15 pm US/Eastern
Bush, Congress, Fed Work To Boost Economy
Fed Slashes Key Interest Rate Amid Recession Fears
WASHINGTON (CBS) ―
President Bush said Tuesday he is confident that Congress and the administration will be able to approve a stimulus package to jump-start the economy and calm fears of recession that have shaken financial markets worldwide.
"I believe we can find common ground to get something done that's big enough, effective enough," Bush said not long after the Federal Reserve Board announced it has cut a key interest rate by three-quarters of a percentage point. His statement came as he commenced a White House meeting with congressional Democrats and Republicans about the economy and other issues.
Last week Bush offered the outline of a short-term economic boost, but the slumping of the global economic market since then has raised the question of whether he's willing to expand the package. Stocks plummeted on Wall Street despite the Federal Reserve's three-quarter percentage point cut in a key interest rate, lending a greater aura of urgency to the White House talks.
Discussing Bush's options, press secretary Dana Perino told reporters: "I'm not going to close the door, but I'm not suggesting that anyone believes it has to be bigger" than the roughly $150 billion figure already discussed. Later, Perino said that at this point the White House has not "seen higher numbers floated by members of Congress" and that Bush believes the growth package he has outlined is "the right amount."
The president last Friday put forward the broad outlines of a stimulus plan that would include tax cuts for individuals and businesses. Bush said any plan, to be effective, would need to represent roughly 1 percent of the gross domestic product, or about $140 billion to $150 billion.
On Wall Street, stocks plunged at the opening of trading, propelling the Dow Jones industrials down about 400 points after the Fed's announcement of its rate cut failed to assuage investors fearing a recession. U.S. markets joined stock exchanges around the globe that have fallen precipitously in recent days amid concerns that a downturn might spread around the world.
Treasury Secretary Henry Paulson, the administration's point man on the economic stimulus bill, discussed details with top lawmakers in both parties in advance of the meeting between Bush and congressional leaders later Tuesday. Agreement was not anticipated immediately, but negotiators on all sides believed that one could emerge quickly.
"I have been very encouraged by the way that both parties have come together, bipartisan support for moving quickly to do something that will make a difference this year in our economy that will be meaningful, that will be temporary and something that we can hopefully get done quickly," Paulson told reporters at the beginning of his meeting with top lawmakers.
The sharp decline of markets in the United States and around the globe is tied in part to the perception that Bush's outlined stimulus package would not do enough to avert a recession.
Perino said the White House does not comment on daily fluctuations in the market. But she did say that people should have confidence in the underlying strength and long-term prospects of the U.S. economy.
"We are not forecasting a recession," Perino said. "Clearly there is a slowdown."
Earlier Tuesday, Paulson told the U.S. Chamber of Commerce that Congress and the administration need to agree quickly on a package of tax cuts. "Time is of the essence and the president stands ready to work on a bipartisan basis to enact economic growth legislation as soon as possible," he said.
The Fed's decision to slash the federal funds rate - the interest that banks charge each other on overnight loans - was the biggest single cut of its kind in recent memory. The Fed cut the rate to 3.5 percent from 4.25 percent - a move that represented the most dramatic signal it could can send of its concern about a recession.
In addition to cutting the funds rate, the Fed said it was reducing its discount rate, the interest it charges to make direct loans to banks, by a similar three-quarters of a percentage point, pushing this rate down to 4 percent.
The Fed said "appreciable downside risks to growth remain" and held out the prospect of further rate cuts.
Commercial banks responded to the Fed's action on the funds rate by announcing similar cuts of three-quarter of a percent on its prime lending rate, the benchmark for millions of business and consumer loans. The action will mean the prime lending rate will drop from 7.25 percent down to 6.50 percent.
Any compromise stimulus package likely would involve tax rebates, business tax cuts and funding for a Democratic-led call for additional food stamp and employment aid. Paulson said he was optimistic the administration and Congress could "get this done long before winter turns to spring."
The administration's initial efforts also failed to reassure global stock markets, which plunged Monday on rising fears that trouble in the U.S. economy could translate into weaker economic activity worldwide. U.S. markets were closed Monday for the Martin Luther King holiday.
Both the White House and leading lawmakers already have displayed flexibility not witnessed last year in battles over spending, taxes and children's health insurance. Lawmakers appearing on weekend televisions talk shows promised bipartisanship.
Bush has advocated a growth package of about $145 billion, centered on tax cuts for business and rebates for individual taxpayers. He did not announce details, but administration officials are focusing on rebates of $800 to $1,600 for individuals and couples and so-called bonus depreciation to allow companies to deduct 50 percent of business investments made this year. He also supports help for small businesses with more generous write-offs on equipment purchases.
On Capitol Hill, talks between Pelosi and House Minority Leader John Boehner, R-Ohio, have focused on smaller tax rebates of perhaps $500 for individuals, bonus depreciation and small business expensing, as well as Democrats' call for boosts in unemployment benefits, food stamp payments and the Medicaid health care program for the poor and disabled.
The rush to produce an economic stimulus bill comes as recent data on the economy is increasingly negative and as the issue has become a top priority with voters.
(© 2008 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
