More whiffs of Economic Recovery agenda…


Richard Moore

"Democrats are also planning a party retreat at the end of the month where they 
are scheduled to hear from Ben S. Bernanke, the chairman of the Federal Reserve,
among other economic experts. Ms. Pelosi plans to meet with Mr. Bernanke on 

January 12, 2008

Bush and Congress Seen Pushing for Stimulus Plan

WASHINGTON ‹ The Bush administration and Congressional leaders, increasingly 
concerned about a possible recession, are moving closer to agreeing that an 
economic stimulus package is needed soon, Washington officials said Friday.

A Republican familiar with the administration¹s thinking said Mr. Bush would 
present ideas to stimulate the economy, most likely in the form of tax relief, 
in his State of the Union message on Jan. 28. Mr. Bush will not decide on the 
details until he returns from the Middle East next week.

Democrats and Republicans on Capitol Hill are also suggesting that they might be
able to put aside longstanding partisan differences and work on a stimulus 
measure, lawmakers and aides said Friday.

In a fresh sign of the possibility of an agreement on a roughly $100 billion 
package of tax cuts and spending to spur the economy, Nancy Pelosi of 
California, the speaker of the House, and Senator Harry Reid of Nevada, the 
majority leader, wrote to President Bush on Friday saying, ³We want to work with

On Monday, Mr. Bush acknowledged that Americans were ³anxious about the economy²
and said he was studying what actions to take. But this Republican, speaking 
anonymously to avoid pre-empting the White House, said, ³If the decision was 
going to be Œno,¹ he wouldn¹t have put that out there.²

Some Democrats say they could support tax relief focused on lower-income people 
and, perhaps, even tax cuts for corporations, if the White House and the 
Republican Congressional leadership accept some spending increases like extended
unemployment benefits or aid to states to help them avert spending cuts.

Responding to Ms. Pelosi and Mr. Reid¹s letter, Tony Fratto, a White House 
spokesman, said Mr. Bush had instructed aides to get views from all sides as he 
decided on a possible economic package.

³We would of course want to proceed in a bipartisan way,² Mr. Fratto said, 
adding Mr. Bush planned to meet, perhaps next week, with Ms. Pelosi and Mr. Reid
to report on his Middle East trip.

Some lawmakers said that calls from the presidential campaign trail for limiting
partisanship and changing the way Washington works were resonating on Capitol 
Hill, but that it would still not be easy for the administration and Democrats 
to bury their ideological differences on an economic rescue package. One model 
could be the bipartisan measure combining tax rebates, corporate tax relief and 
unemployment benefits that Congress approved in the last economic slump, in 
March 2002.

But these Democrats said the White House would have to agree not to try to 
attach favorite measures like repealing the estate tax or making permanent Mr. 
Bush¹s 2001 and 2003 cuts, just as Democrats would have to refrain from 
attaching extraneous spending.

³It would make sense for the president to do something in a bipartisan way,² 
said Representative Charles B. Rangel, Democrat of New York and chairman of the 
Ways and Means Committee. ³But I¹m scared to death to even talk about tax 
rebates because of what that might open up.²

A senior Republican aide said: ³Republicans will have to talk about making the 
tax cuts permanent and all that kind of stuff. Democrats are going to want 
things on their long-term agenda. But if you figure those cancel each other out,
there¹s probably a playing field where everyone can agree.²

Democrats appeared to be further along in their thinking than the 
administration, having decided in December to spend the early part of 2008 
blaming Mr. Bush for the economic anxieties of the middle class. Until recently,
Republicans in Congress and in the presidential campaigns have said the economy 
was healthy.

With the House returning next week, Representative Rahm Emanuel of Illinois, the
House Democratic caucus leader; Representative James E. Clyburn of South 
Carolina, the Democratic whip; and Representative Barney Frank of Massachusetts,
the chairman of the Financial Services Committee, plan to give major economic 
speeches in Illinois, Washington and at Harvard.

Democrats are also planning a party retreat at the end of the month where they 
are scheduled to hear from Ben S. Bernanke, the chairman of the Federal Reserve,
among other economic experts. Ms. Pelosi plans to meet with Mr. Bernanke on 

Still, some Bush administration officials say any action should be sooner rather
than later. ³Time will be of the essence,² Henry M. Paulson Jr., the treasury 
secretary, said Friday on Bloomberg Television. ³So I think we want to do 
something as quickly as possible if we do it.²

The tone changed quickly over the last few weeks, especially after the level of 
unemployment grew, oil prices reached $100 a barrel, the stock market stumbled 
and the housing crisis worsened. Leading Republican and Democratic economists 
soon began voicing fears of a recession, with some even suggesting one had 
already begun. New polls show Americans are increasingly alarmed, and the topic 
has figured more and more in presidential debates. On Tuesday, New Hampshire 
primary voters in both parties cited the economy as their top concern.

Mr. Bernanke laid out a bleak picture of the economy on Thursday and suggested 
that the Fed would cut interest rates soon. That has made it more acceptable for
lawmakers to discuss the need for actions to avoid being blamed for failing to 

The first presidential candidate, indeed the first leading Democrat, to offer a 
package was Senator Hillary Rodham Clinton of New York, who on Friday proposed 
$70 billion in spending for housing, heating subsidies and state aid and $40 
billion in tax rebates if conditions worsened.

Mrs. Clinton¹s package drew on the thinking of leading Democratic policy makers,
many of whom served under President Bill Clinton and are advising Democratic 
leaders in Congress.

One of those advisers, Gene B. Sperling, was on Capitol Hill on Friday for 
meetings with Democrats. Mr. Sperling worked closely with Ms. Pelosi on the 
economic stimulus package that she brokered with Mr. Bush shortly after she 
became minority leader.

Leading Democrats said they envisioned a proposal of at least $100 billion, 
which economists say is the minimum needed to counter a recession that many for 
now say would probably be short.

Many Democrats are reciting what they call the ³three T¹s² for the stimulus 
package, that it should be temporary, timely and targeted to low- and 
middle-income Americans. The mantra is intended as a shield against Republican 
attacks that Democrats would go on a spending spree, as well as Republican calls
to make Mr. Bush¹s tax cuts permanent after they expire in 2010.

Republicans are expected to emphasize tax cuts for individuals and businesses. 
Kevin A. Hassett, director of economic policy studies at the American Enterprise
Institute, said tax relief to spur business investment would be especially 
useful now.

³These issues aren¹t really in dispute,² Mr. Hassett said. ³If you want to do a 
stimulus package, it should juice up activity this year and then go away. But it
has to have two components, one for individuals and one for business firms to 
spur capital investment.²

Mr. Hassett and other Republican economists also warned that a package that was 
caught up in grandstanding on both sides might come too late to do any good. In 
1992, for example, after President George Bush invited Democrats to submit a 
stimulus package, both sides argued as the recession came and went.

But many Republicans said there was a risk of their seeming indifferent to the 
economic situation, especially to Americans in danger of losing their homes 
because of the subprime mortgage crisis, and a risk of holding a package hostage
to their long-term tax-cutting agenda.

Democrats are hardly united, however. Some are likely to demand spending for 
public works as part of any package. Others say they are worried that they will 
be accused of violating the party¹s promise to ³pay as you go² by offsetting any
tax cuts or spending increases with savings.

But most Democrats are saying that, at a time of an economic downturn, they do 
not need to stick to that promise.

³Once pay-go is set aside, you could really see the discussion take off,² a 
Democratic Congressional aide said. ³You could start to align the House and 
Senate and then triangulate with the White House on what could be done on a 
faster track.²

Carl Hulse contributed reporting.

Copyright 2008 The New York Times Company

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