Bush Calls for Up to $150 Billion
In Stimulus to Boost Economy

By HENRY J. PULIZZI and MICHAEL R. CRITTENDEN
January 18, 2008 6:49 p.m.

WASHINGTON -- President George W. Bush called for tax incentives for businesses and "direct and rapid" tax relief for individuals, saying a stimulus package should be passed as soon as possible to shield the U.S. economy from a steep downturn.

President Bush, accompanied by Treasury Secretary Henry Paulson, laid out the principles of his stimulus package from the White House Friday.

"This growth package must be built on broad based tax relief that will directly affect economic growth and not the kind of spending projects that will have little impact on our economy," Mr. Bush said in brief remarks from the White House.

To be effective, Mr. Bush said the stimulus must be temporary, take effect right away and not include tax increases. He said the size of the package should be around 1% of U.S. gross domestic product, or $140 billion to $150 billion.

"By passing an effective growth package swiftly we can provide a shot in the arm to keep a fundamentally strong economy healthy," Mr. Bush said.

The comments were met with mixed emotions by Democrats, who have raised concerns about the economy for months.

"It's clear that President Bush now recognizes the severity of current economic conditions and the need to provide a timely and temporary boost to the economy, but it's not yet clear that he would agree to targeting a plan toward people most in need," Rep. Carolyn Maloney (D., N.Y.) said in a statement.

As expected, Mr. Bush didn't detail specific components of his preferred stimulus plan, but laid out the principles he would like to guide the package. He called for tax measures to give businesses an incentive to make major investments this year and direct tax relief for individuals.

"Americans could use this money as they see fit: to help meet their monthly bills, cover higher costs at the gas pump or pay for other basic necessities," Mr. Bush said. "Letting Americans keep more of their own money should increase consumer spending and lift our economy at a time when people otherwise might spend less."

Neither Mr. Bush nor U.S. Treasury Secretary Henry Paulson said how large potential tax rebates would be or who would receive them. "We have been thinking that the biggest portion of this package should be aimed at consumers, taxpayers, and providing them relief," Mr. Paulson told reporters at a briefing.

A congressional aide familiar with Thursday's conference call between Mr. Bush and lawmakers said the White House is mulling giving individuals and households tax rebates of $800 and $1,600, respectively, and letting businesses deduct half of their new equipment purchases.

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Mr. Bush's last stimulus plan in 2001 included rebate checks of either $300 or $600. It took around 10 weeks to issue those checks, and the Congressional Budget Office said a similar delivery time can be expected if rebates are included this time around.

With the housing crisis, soaring energy prices, and turbulent financial markets darkening the economic outlook, the White House and Congress are racing to put together a package to goose the economy. Mr. Bush's comments Friday were his first public acknowledgment that stimulus is needed.

He said economic growth is likely to slow this year, with "a risk of a downturn." Continued weakness housing and financial markets, he warned, could cause further damage to the economy, threatening growth and job creation.

"I've concluded that additional action is needed," Mr. Bush said. "To keep our economy growing and creating jobs, Congress and the administration need to work to enact an economic growth package as soon as possible."

Mr. Paulson said a stimulus package could help the economy create 500,000 more jobs "more or less" than it otherwise would.

In a concession that could help speed the process of implementing a stimulus plans, the White House said it would separate its campaign to make Mr. Bush's 2001 and 2003 tax cuts permanent from the stimulus negotiations. Mr. Bush, however, repeated this call to make the tax cuts permanent.

"A source of uncertainty in our economy is that this tax relief is set to expire at the end of 2010," he said. "Unless Congress acts, the American people will face massive tax increases in less than three years."

Even with the 2001 tax cuts off the table, the stimulus talks face some obstacles. Democrats are pushing for increased spending on food stamps and unemployment insurance benefits.

"We want a balanced package with tax rebates to the middle class and spending stimulus that will jumpstart the economy immediately," Sen. Charles Schumer, (D., N.Y.) said. "The President has included one, he also needs to include the other in order to quickly improve our economy."

The White House stance on those types of proposals is unclear, however. "We've looked at a lot of things. We believe that there's a great benefit to being simple," Mr. Paulson said. "You know, the Christmas season has come and gone. We're not trying to decorate a Christmas tree here."

White House spokesman Tony Fratto said the administration and lawmakers aren't far apart on the stimulus. House Speaker Nancy Pelosi (D., Calif.) told CNBC Thursday that a deal could be done in around 30 days.

"That would be my outside limit, because, again, every day around the kitchen table people are feeling this hardship," Ms. Pelosi said.

"If it's broad-based and simple, I believe we'll be able to get it out quickly, in time to make a real difference this year," Mr. Paulson added.

Mr. Bush remained largely optimistic about the state of the economy, saying it has been resilient during past challenges.

"In a vibrant economy, markets rise and decline. We cannot change that fundamental dynamic," he said. "Yet there are also times when swift and temporary actions can help ensure that inevitable market adjustments do not undermine the health of the broader economy. This is such a moment."

Write to Henry J. Pulizzi at henry.pulizzi@dowjones.com and Michael R. Crittenden at michael.crittenden@dowjones.com