President Bush told congressional leaders privately on Thursday he favors personal income tax rebates and tax breaks for businesses to help avert a recession, officials said, as Federal Reserve Chairman Ben Bernanke joined in calls for an economic stimulus package.
Bush spoke with congressional leaders as top House aides worked on an economic rescue package that included more money for food stamp recipients and the unemployed as well as tax rebates and cuts.
Officials described the developments on condition of anonymity until a formal announcement was made, and no further details were immediately available about the size of the rebates or components of the emerging package.
The government last sent out tax rebate checks during the 2001 recession, reports CBS News correspondent Anthony Mason. Between July and September of that year, individuals were sent $300 checks; married couples: $600. In all, 90 million households received $38 billion in rebates.
One official said the president did not push for a permanent extension of his 2001 and 2003 tax cuts, many of which are due to expire in 2010. That would eliminate a potential stumbling block to swift action by Congress, since most Democrats oppose making the tax cuts permanent.
Bernanke voiced support for a stimulus package in an appearance before the House Budget Committee, but said it had to be quick and temporary.
"Putting money into the hands of households and firms that would spend it in the near term" is a priority, Bernanke told the committee.
Bush planned to talk about his criteria for the program at the White House Friday morning and later that day in a speech at a manufacturing plant in Frederick, Md.
In his committee appearance, Bernanke said such a plan should be aimed at quickly getting cash into the hands of people, especially those with low and moderate incomes. Bush wasn't going to spell out any specifics in his remarks, but instead demand that any package be effective, simple and temporary, said White House press secretary Dana Perino.
Perino said that Bush and congressional leaders from both parties consulted via conference call Thursday for about 30 minutes about their plans to work together on growth measures. In the Capitol, House Speaker Nancy Pelosi, D-Calif., has talked of a package totaling $100 billion or more.
The rush to swing behind a stimulus plan underscored the political imperative of responding to a growing concern about the possibility of recession.
The economic headwinds caused by the housing slump seem to be getting stronger, reports Mason. In Atlanta, now through the weekend, more than 500 foreclosed houses, are being auctioned to the highest bidder.
Bernanke declined to endorse any particular approach in Capitol Hill appearance, but did say that he preferred one that would act quickly, and not have a long-term adverse impact on the deficit. "The design and implementation of the fiscal program are critically important," he said.
He spoke as senior aides to House Democrats and Republicans reviewed an emerging plan that included tax rebates for individuals, breaks for businesses and more money to help food stamp recipients and the unemployed. Additional aid to help states complete construction projects was also among the proposals under consideration, according to officials familiar with the discussions. They spoke on condition of anonymity, saying they did not want to pre-empt an eventual announcement.
Additional details were not immediately available.
Former Treasury Secretary Larry Summers told CBS' The Early Show that the federal government needs to address the nation's economic troubles on several levels.
"Injecting more money into the economy so consumers are able to spend more. When consumers are able to spend more, there's more demand in the economy. That may come through tax relief that's properly targeted to those who are most likely to spend it," Summers explained.
Summers indicated that relief may also come from accelerating benefits to those who are most likely to spend it: Middle and lower income Americans.
Perino said conference call showed that both parties basically were in agreement that they needed to do something, and that they needed to cooperate and that it needed to happen quickly.
The White House had said earlier that Bush concluded "some boost is necessary." Previously, it said the president was only considering only a short-term boost. Perino said Bush was convinced by the daily economic briefings he received while away on a Mideast trip, and she said that he won't necessarily wait until his State of the Union address at the end of the month to announce specifics.
White House deputy press secretary Tony Fratto said he saw "no obstacle" to a speedy agreement with Congress.
The statements by the White House Thursday marked the first time that it has confirmed that Bush supports government intervention.
"There is reason to be hopeful when the president recognizes there is a problem in the country," Pelosi said after the conference call with Bush.
Boehner said he was encouraged.
House Majority Leader Steny Hoyer, D-Md., said, "It was useful and I hope it leads to a cooperative effort to come up with something to help stimulate the economy and do so quickly in a bipartisan fashion. He indicated that he wants to work together to get something done."
Pelosi said that officials "have to spend the money, invest the resources, give the tax relief in a way that again injects demand into the economy, puts it in the hands of those who need it most and into the middle class ... so that we can create jobs."
But Boehner said: "For this bill to become law, it cannot become a Christmas tree. It's hard to get anything moving within a year, and most of us believe that if we're going to have a stimulative effect at helping to revive what is becoming a sluggish economy, it needs to happen quickly."
Fratto said Bush does not believe that a stimulus should be offset - or paid for - by any tax or spending changes elsewhere. Some moderate, deficit-hawk Democrats have pushed for one but it is not expected to be part of a package.
Bernanke forecast slower growth in 2008 but not a recession.
When asked about the potential effect of a fiscal stimulus package totaling around $100 billion, he said the impact could be "significant" and not "window dressing." Some have floated packages that would range in size from $50 billion to billion to $150 billion - all of which are in the range of "reasonable," Bernanke said. Rebates can be particularly useful, he added.
"Getting money to people quickly is good, and getting money to low and moderate-income people is good, in the sense of getting bang for buck" because they tend to spend it quickly, Bernanke said. Research shows that the affluent spend some of their rebates, he said.
Temporary expensing and depreciation provisions for businesses also could spur spending, which would help the economy, he said. As it puts together a package, Bernanke added, "Congress might want to consider a diversified mix of elements."
But he warned: "I hope Congress can resist having a huge list of things" that would lard up legislation and may not do much to help bolster the economy in the short run.
The fragile state of the economy has gripped Wall Street and Main Street and is a rising concern among voters. The situation has galvanized politicians - including those vying to be the next president - and poses the biggest test to Bernanke, who took over the Fed nearly two years ago.
Said House Budget Committee Chairman John Spratt, D-S.C.: "It has become increasingly clear that our economy is slowing down, entering a slump if not a recession." Rep. Dan Lungren, D-Calif., likened a stimulus package to a "vitamin B-12 shot."
In his testimony, Bernanke again pledged to aggressively slash a key interest rate as needed to bolster an economy that is weakening under the strains of a severe housing slump and credit crisis.
Many economists believe the Fed will lower its key rate, now at 4.25 percent, by a bold half-percentage point at its next meeting on Jan. 30. Some critics on Wall Street and elsewhere have second-guessed Bernanke for not taking action sooner and more forcefully.
Although Republicans and Democrats differ over what provisions should be part of any economic stimulus package, there's widespread agreement that tax rebates along the lines of the $300-$600 checks provided in 2001 are likely to be part of the measure. The country last suffered a recession in 2001. This time around, the rebates could be larger. It's also likely that unemployment benefits will be extended as part of the package.
"To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next 12 months or so," Bernanke told lawmakers.
He also said that any such package must be temporary to avoid making a big boost to the federal government's budget deficits and adding to the country's long-term fiscal burdens.
"The nation faces daunting long-run budget challenges associated with an aging population, rising health care costs and other factors. A fiscal program that increased the structural budget deficit would only make confronting those challenges more difficult," Bernanke warned.
Before Bernanke spoke, there was yet more downbeat economic and financial news. The Commerce Department said new-home building plunged last year by 24.8 percent, the biggest drop in 27 years.