US Treasury Secretary Paul O'Neill said today that President George W. Bush wants Congress to approve a stimulus plan of up to $75 billion £(50.6m) to avert a steep economic recession triggered in part by last month's terrorist attacks in the United States.
Mr O'Neill told the Senate Finance Committee that he now expects negative real growth in the current quarter but similar poor performance could be avoided in the fourth quarter if consumer confidence quickly rebounds.
"The depth of this contraction, as well as the pace at which the economy returns to a healthy rate of growth, will depend in large part on how fast consumers regain their confidence and on our success in incorporating new protections against terrorist acts without material reductions in productivity," Mr O'Neill said in his prepared remarks.
He said the president asked him to work with Congress to develop an additional fiscal 2002 economic stimulus plan of between $60 billion and $75 billion. That would bring total stimulus approved by the government since the 11 September attacks to well over the $100 billion many economists believe is needed to be effective. Congress has already passed a $40 billion emergency spending plan and a $15 billion airline aid package.
Mr O'Neill offered no specific tax breaks or spending proposals but said any stimulus plan should restore consumer demand, boost business investment and help those affected by the attacks. He suggested the plan should focus on short–term solutions to avoid future government fiscal problems that would harm the economy.
"The president believes, and there seems to be broad bipartisan agreement in Congress, that we should take care not to put upward pressure on long–term interest rates," he said. "We are confident we can come together to create a fiscally responsible stimulus package that will restore confidence and prosperity in our economy."
Most Republicans and Democrats agree that any plan to stimulate the shaky economy should be short–term and large enough to be effective, but not so big that it causes other fiscal woes. Less clear is precisely what to do.
Options being discussed include a new round of tax rebates, perhaps timed for the important holiday retail season, as well as a variety of business tax breaks and assistance for the jobless.
Many Democrats and some Republicans favour another round of tax rebates, although expanded to include the roughly 30 million Americans whose wages are so low they did not qualify for the checks mailed out earlier in the year. Virtually all wage–earners pay Social Security payroll taxes, and tax relief could be based on those levies.
Democrats have made it clear they are mainly interested in providing tax cuts to this group of lower–paid workers and less determined to extend the tax breaks to those who have already received checks.
But there are prominent naysayers. Rep. Bill Thomas, chairman of the House Ways and Means Committee, said rebates would not deal with the primary economic problem – lack of business investment and huge inventories.
"Consumers have not been the problem," said Thomas.
To aid laid–off workers, Bush has signaled he would consider a 13–week extension in unemployment benefits beyond the usual 26 weeks. Since joblessness in many states is unlikely to reach the levels that mandate an extension, one official said the administration is looking at the possibility of using federal funds to target relief.Reuse content