Bush Proposes $145 Billion Stimulus Plan

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Bush Calls for $145 Billon in Tax Relief

President Bush on Friday called for about $145 billion worth of tax relief to stimulate a sagging economy and fend off a possible recession.

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Bush was careful to leave options open as he outlined his principles for a stimulus package. To be big enough to have an effect, he said, it should be about 1 percent of the nation's gross domestic product, from $140 billion to $150 billion, and it should be built on tax incentives rather than infrastructure spending, which would not pump money into the economy fast enough.

He said relief should be temporary and take effect right away, and it should not be paid for by increasing other taxes. In a bow to Democrats, he agreed to leave for another day the fight over extending the tax cuts he pushed through in 2001 and 2003.

Under the plan the two sides are discussing privately, according to officials speaking on the condition of anonymity, the 10 percent income tax bracket would be reduced to zero for one year, meaning single workers would not pay tax on the first $8,025 of taxable income, nor would a married couple pay anything on the first $16,050. That would save them $800 and $1,600, respectively. The money would be sent to taxpayers right away in the form of rebate checks.

A sticking point is what would happen to workers who file but make too little to pay income taxes. Treasury Secretary Henry M. Paulson said Bush wants "broad-based tax relief for those who are paying taxes," implying that those who do not would receive no benefits. About 50 million workers make too little to pay income taxes, although they do pay Social Security and Medicare taxes. The Center on Budget and Policy Priorities estimated that a family of four making less than $24,900 would get nothing under such a formula.

But administration and congressional officials privately suggested that this is an area for compromise. The tax cut could be made refundable, or the earned-income tax credit that goes to low-income workers could be increased, they said, much as what happened when Bush and Congress provided $300 tax rebates in 2001 to boost the economy.

Indeed, the administration did not rule out going along with a stimulus that includes elements beyond those Bush endorsed.

"Those are what they are: principles and guidelines," Paulson said when asked in an interview whether Bush's comments preclude a bill that includes Democratic priorities, such as increased unemployment benefits. "We're working collaboratively to narrow the differences and get something done."

Paulson said Bush's goal in making his announcement yesterday was "to put forward the outlines and parameters and principles of a program so as to speed the process along, but not to be so definitive that it discourages collaboration and a bipartisan approach."

Paulson planned to make telephone calls over the weekend, and congressional aides said they hope Bush can reach agreement with Pelosi and Reid during a White House meeting scheduled for Tuesday.

The impact of a stimulus package is open to debate. Paulson estimated that it would create 500,000 more jobs than the economy would otherwise produce. But several investment professionals were skeptical not only of the merits of the package but also of Washington's ability to work together quickly enough.

"The market realizes Congress and Bush are going to have to get together on it, which is itself is problematic," said Mark Coffelt, chief investment officer of Empiric Funds. "Given the process, by the time it occurs, we'll probably be out of a recession."

On the substance of the package, Bush's principles came under attack from both left and right. Unions and liberal lawmakers said it would benefit the wealthy, and they pushed instead for large public works projects that would employ many people. Conservative lawmakers and economists said a temporary rebate would do nothing to strengthen the economy over the long term, and they faulted Bush for putting off his efforts to renew the first-term tax cuts.

But the administration and legislative leaders appear more eager to find something to agree on than to stand on philosophical ground and risk passing nothing. Sen. John E. Sununu (R-N.H.), back in the Capitol after weeks at home for the holiday recess, said anxiety over the economy is deep. "A lot of us feel the pressure," said Sununu, one of the most vulnerable incumbents facing reelection this fall.

Sen. Arlen Specter (R-Pa.) said Bush and Pelosi "got the message" from the public that another standoff would be unacceptable. "There's been notice from the American people that they're sick and tired of gridlock," he said. "We hear it all the time. Congress is on the spot. It's sort of deliver, or else."

Staff writers Tomoeh Murakami Tse and Paul Kane contributed to this report.