Bush backs $150bn tonic for US economy

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The Independent Online

Businesses operating in the US can expect tax breaks on investment, as part of a $150bn package of measures to stimulate the economy. President George Bush insisted yesterday that corporate America be included in the new economic rescue plan under discussion in Washington, which is aimed at preventing a recession and a sharp rise in unemployment.

A raft of measures to cut corporate tax bills could include allowing accelerated depreciation of investment, the president said. "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," he said.

In order to have a meaningful effect on the most powerful economy in the world, the stimulus package should be worth about 1 per cent of US GDP – that is, between $140bn and $150bn – Mr Bush said. Most of the money is expected to be targeted at consumers, via tax rebates. Individuals could receive cheques for $800 each as early as the summer, according to one behind-the-scenes plan. "This growth package must be temporary and take effect right away so we can get help to our economy when it needs it most," Mr Bush said.

Weaker-than-expected consumer spending and rising unemployment have stirred fears that the US could dip into recession this year. Falling house prices and rising foreclosures have begun to bleed into the rest of the economy.

A cross-party consensus has quickly emerged in favour of a fiscal stimulus to keep the economy out of recession, but Mr Bush's remarks yesterday put a bigger figure on its likely size than has been suggested before.

Kevin Logan, senior US economist at Dresdner Kleinwort, said politicians were engaged in a "bidding war" on the subject. "No one screamed at $70bn, no one was screaming at $100bn, so it keeps going higher," he said.