By Roger Runningen and Catherine Dodge
Jan. 19 (Bloomberg) -- The Bush administration proposed as much as $150 billion in corporate investment incentives and personal tax rebates to counter escalating risks to an economic expansion now in its seventh year.
``Passing a new growth package is our most pressing economic priority,'' President George W. Bush said yesterday at the White House after meeting with his economic advisers.
Bush separated the plan from his push to make his past tax cuts permanent. That suggests the administration and lawmakers may be able to reach a deal more quickly, as Democrats warned against including an extension of the tax reductions in any package. Several Democrats voiced support for Bush's initiative.
Treasury Secretary Henry Paulson said the plan would help create about a half-million jobs this year. Bush said Paulson will lead the administration's efforts at crafting a deal with the Democratic-majority Congress.
While the economic fundamentals are strong, ``there is a risk of a downturn,'' Bush said. The plan must include tax incentives for businesses and ``direct and rapid income tax relief for the American people,'' he said.
Bush said the package should total about 1 percent of gross domestic product, which was an annualized $13.97 trillion in the third quarter. Paulson later cited at a press briefing an estimate of $140 billion to $150 billion.
A continued decline in the housing market and the rising cost of oil may cause more harm to the economy and jeopardize job creation, the president said.
The announcement failed to help lift stocks from of their worst-ever start to a year. The Standard & Poor's 500 Index completed its biggest weekly loss in five years yesterday, falling 0.6 percent, and is down 9.8 percent for 2008. Reports yesterday showed that U.S. consumer confidence rose, while a measure of the economy's direction over the next three to six months fell.
Paulson, at the later White House briefing, reiterated his belief that the housing market is ``the biggest issue we have in our economy'' and said the administration was considering further measures to help struggling homeowners.
``We have been open to any good idea we've heard,'' he said. ``We're focused on what we think are the right ideas.''
The U.S. unemployment rate in December climbed to 5 percent, the highest in two years, from 4.7 percent the previous month. Employment growth in the U.S. was 1.33 million last year, down from 2.26 million jobs a year earlier.
Federal Reserve Chairman Ben S. Bernanke told lawmakers yesterday that a stimulus plan of up to $150 billion would be ``significant'' and not ``window dressing.''
Bush didn't offer specifics on a stimulus plan, saying he wants to reach an agreement with Congress. The administration is considering offering $800 tax rebates for individuals and $1,600 for households, people familiar with the discussions said.
``My advisers and many outside experts expect that our economy will continue to grow over the coming year, but at a slower rate than we have enjoyed for the past few years,'' Bush said.
While the administration has taken steps to help homeowners avert foreclosure and asked Congress to allow the Federal Housing Administration to provide additional relief, more help is needed to bolster the economy, Bush said.
``This growth package must be big enough to make a difference in an economy as large and dynamic as ours, which means it should be about 1 percent of GDP,'' Bush said.
The plan must be temporary and shouldn't include any tax increases, Bush said.
``Yesterday I spoke to members of the congressional leadership from both political parties,'' Bush said. ``I was encouraged by those discussions, and I believe there is enough broad consensus that we can come up with a package that can be approved with bipartisan support.''
The White House and Congress are trying to hammer out an agreement quickly, with some Democrats saying it could come in 30 to 45 days.
Democrats in Congress said they were pleased by Bush's remarks.
``I was encouraged that President Bush agreed today with members of Congress on both sides of the aisle that an economic stimulus package is necessary,'' House Majority Leader Steny Hoyer, a Maryland Democrat, said yesterday.
Leon Panetta, who served as President Bill Clinton's chief of staff and budget director, called efforts by Bush and the Democrats ``the right step to take.''
``I just hope that they keep it timely, they keep it targeted, and they keep it temporary,'' Panetta said in an interview with Bloomberg Television.