That's just the start of the pre-election year budget and economic fight, reports CBS News White House Correspondent Peter Maer. The president will also propose speeding income tax rate reductions in all tax brackets, and wants to let companies write off investments sooner.
And even before the president unveils his proposal in a speech to the Economic Club in Chicago Tuesday, Congressional Democrats were to announce their own blueprint Monday. Democrats began their assault with appearances on Sunday talk shows, where they intensified criticism of Mr. Bush's plan as giving too much help to corporations and the wealthy, and not enough to the middle class.
New House Democratic leader Rep. Nancy Pelosi of California said last week the Democrats' plan would focus on job creation and would not cost as much as Mr. Bush's proposal, which administration officials say could cost $600 billion over 10 years.
Mr. Bush's plan likely will include an extension of unemployment benefits; an acceleration of tax cuts Congress approved in 2001; a cut in dividend taxes by 50 percent or more; and tax incentives to prompt more spending by businesses.
While declining to discuss the specifics of the stimulus plan, spokesman Ari Fleischer said Monday the president had not made all the decisions yet, even though he planned announce it the following day.
"Taxes on investments are taxes on peoples' futures," Fleisher said, but stopped short of confirming reports the president wants to eliminate the tax on dividends.
Foes of the dividend tax say it is both unfair and counter-productive — unfair because, they say, taxing dividends paid out of corporations' after-tax income amounts to double taxation; and counter-productive because it could reduce incentives to invest.
However, the Senate's second-ranking Democrat, Harry Reid of Nevada, said elements like the dividend tax cut largely ignore the poor and middle class. "We should do something to take care of people who work for corporations, not help the corporations necessarily," he told NBC's Meet the Press.
Sen. John Edwards, D-N.C., a 2004 presidential hopeful, said on ABC's This Week that "if this is what (Mr. Bush) thinks is going to help regular people in times of an economic downturn, it just shows how out of touch he is."
Republican Sen. John McCain of Arizona, showed some sympathy with the Democrats' argument.
"I think probably it's a good idea to have some cuts in dividends and taxes on dividends but I think it's important to recognize that the people that kept our economy going are middle-income Americans," he said on CBS' "Face the Nation."
Sen. Evan Bayh, D-Ind., said, however, some expected elements of the plan would win bipartisan support. He cited assistance for states to offset budget deficits and targeted tax cuts that help the middle class.
Among tax relief accelerations under consideration by Mr. Bush are expanding the child tax credit to $1,000 sooner than now called for and providing relief from the marriage penalty paid by two-earner couples more quickly than in current law.
"You may see some fine-tuning of the president's program to make it more effective, to actually get more bang for the buck," Bayh said on CNN's Late Edition.
In Mr. Bush's defense, Sen. Don Nickles of Oklahoma, the outgoing No. 2 GOP leader, said cutting dividend taxes, helping corporations and stimulating investment could boost 401(k) retirement plans and put more money into companies that could then be used to hire more workers.
Nickles said he hoped the Senate would address the issue of extending unemployment benefits as early as Tuesday, when it returns to session.
Sen. Chuck Hagel, R-Neb., said Bush's plan was well-balanced and smartly focused on encouraging investment.
"Our productivity comes from capital investment," Hagel told CNN. "That is the smart way, the only way to grow the economy, and the long-term obligation that this government has. The president is on the right track."
Pelosi did not give details of the Democratic plan last week, but aides said it would center on three components: extending unemployment benefits and assuring that all laid-off workers are eligible for 26 weeks of federal aid; providing payroll tax relief and tax cuts for small businesses; and giving aid to states to promote infrastructure and homeland security projects.
Extended unemployment benefits for roughly 780,000 workers expired on Dec. 28, and Congress failed to renew the program because of a dispute between Senate Democrats and House Republicans over whom the program should include.
A liberal research group, the Center for Budget and Policy Priorities, estimates that an additional one million workers had already exhausted their benefits before the Dec. 28 deadline.
Currently, only about half of unemployed workers receive unemployment benefits.