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January 18, 2008

Bush Proposes $140-150 Billion "Shot In The Arm" For Ailing Economy

I have no strong opinion, not being an economist. The biggest part of it seems to be an $800 per person tax rebate. He's giving up on trying to force Congress to make his tax cuts permanent as part of the stimulus.

President Bush, acknowledging the risk of recession, embraced about $145 billion worth of tax relief Friday to give the economy a "shot in the arm. "

Bush said such a growth package must also include tax incentives for business investment and quick tax relief for individuals. And he said that to be effective, an economic stimulus package would need to roughly represent 1 percent of the gross domestic product -- the value of all U.S. goods and services and the best measure of the country's economic standing.

"There is a risk of a downturn," the president said in his remarks at the White House.

Treasury Secretary Henry Paulson, speaking after Bush's remarks, said 1 percent of GDP would equate to $140 billion to $150 billion, which is along the lines of what private economists say should be sufficient to help give the economy a short-term boost.

Paulson said the largest part of the stimulus package would be targeted to individual taxpayers. One Republican official, speaking on condition of anonymity, said Bush was hoping to target about $100 billion toward individuals and about $50 billion toward businesses.

The president and Congress are scrambling to take action as fears mount that a severe housing slump and painful credit crisis could cause people to close their wallets and businesses to put a lid on hiring, throwing the nation into its first recession since 2001.

Bush said that Congress and the administration need to settle on a temporary economic package that could be implemented quickly to "keep our economy growing and create jobs." While Bush focused on taxes, Democratic and Republican leaders in Congress have been working on a package that would also include extending and perhaps increasing unemployment benefits and a temporary increase in food stamps.

"Letting Americans keep more of their money should increase consumer spending," he said.

Bush outlined several criteria for the package to meet: It must be "big enough to make a difference in an economy as large and dynamic as ours," it must be built on "broad-based tax relief," it must take effect right away but be temporary, and it must not include any tax increases.

Specifically, he called for tax incentives for businesses, including small companies, to make new and major investments this year. "Giving them an incentive to invest now will encourage business owners to expand their operations, create new jobs and inject new energy into our economy in the process," Bush said.

Do these things ever work? I mean in the short-term; obviously longer term fiscal and monetary policy has longer-term consequences. They seem not to work to me; the economy falters when it falters and rebounds when it rebounds, and all this "stimulus" stuff is just political window-dressing to let voters know "we're doing something."


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posted by Ace at 02:07 PM

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