Lawmakers, Bush Face Test Over Economy

A house in Denver joins the swelling ranks of foreclosures. The subprime mortgage crisis, poor job growth, higher unemployment and an expanding trade deficit have spurred fears of recession. (By David Zalubowski -- Associated Press)

Among the options Bush is considering, according to officials who insisted on anonymity to discuss internal deliberations, are a tax rebate of several hundred dollars per taxpayer, probably limited to those in the middle and lower income brackets, and a "bonus depreciation" for businesses, allowing them to accelerate their deductions for equipment. Officials would not discuss the size of the package but noted that economists have said it needs to be between $50 billion and $100 billion to have an impact.

Democrats are looking at a tax rebate as well but also want new spending to ease the economic crunch. Among their ideas are extending unemployment benefits, home-heating subsidies and food stamps, and steering billions to states, which could use the money to help those caught up in the housing crisis. Democrats said they are talking about a package in the area of $100 billion.

Proposals from both sides are still in development. Bush will not make any decisions until returning from the Middle East this week and could outline any plan in his State of the Union speech Jan. 28. House and Senate Democratic aides met for the first time only last week to start discussing ideas. The Joint Economic Committee will hold a hearing Wednesday, and Senate Finance Committee Chairman Max Baucus (D-Mont.) plans to hold hearings when lawmakers return.

For now, both sides are sending signals that they want to come together to get something done. House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.) sent Bush a letter Friday saying they wanted to work with him on a stimulus package and asking for a meeting before either side releases proposals. Fratto, the White House spokesman, said Bush already planned to invite the leadership to the White House after returning from the Middle East, to brief them on the trip, and they could easily talk about the economy then, too.

Yet the two sides are already laying down markers. The White House says any stimulus package should not include public works projects often favored by Democratic lawmakers because such spending would not move into the economy fast enough to have any impact. Democrats said a package should be "timely, targeted and temporary," meaning Bush should not use the issue to try to make his first-term tax cuts permanent.

"If they tie this to something ideological like extending the president's tax cuts, the package will fail," Sen. Charles E. Schumer (D-N.Y.), chairman of the Joint Economic Committee, said in an interview Friday before using Saturday's weekly Democratic radio address to highlight the need for stimulus. "But certainly we know there has to be something of a give-and-take."

A senior House Democratic aide said it would not be hard to put together a compromise that would include some elements from Bush's menu and some from the Democrats'. "We may have to take some of theirs and they take some of ours to get something done," he said. "We're willing to do that. The question is whether they are."

A senior administration official said that while Bush wants to renew his tax cuts, officials understand that trying to deal with that in a stimulus package would bog it down: "If you keep it simple enough, you can get something done. If everybody puts their favorite pet project in there, you're not going to get anywhere."