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Brian Wingfield, 01.18.08, 3:40 PM ET
Washington, D.C. - Worried about the economy? So is Washington. But despite speculation that President Bush would provide some details of a plan to lift the economy out of its current slump, neither he nor two of his top economic advisers offered up anything concrete in separate remarks Friday. Petulant markets hated it, but it was a smart move.
Bush said a fiscal stimulus package is necessary, and that it must be "built on broad-based tax relief," that it should not include tax increases and that it needs to be about 1% of gross domestic product (about $145 billion) in order to be effective. Bush’s advisers said that relief would go to “those who are paying taxes,” essentially meaning that only those taxpayers who earn enough to owe income taxes will receive relief. That's a source of disagreement with Democrats, who want to see lower-income folks who pay Social Security but not income taxes get relief in the form of a rebate check too. And no one indicated when Americans might receive their relief checks. U.S. markets dropped on the remarks.
Investors hoped media reports were accurate, that the president's package would include a tax rebate of up to $1,600 for households and $800 for individual tax filers, possibly by temporarily doing away with the 10% tax bracket. It is known that Bush wants to see tax incentives for businesses and that he will not seek permanent extension of tax cuts that are set to expire in 2010. The president is expected to push for that goal separately.
Nearly everyone--from leaders in Congress to the Fed to the White House--agrees that the economy is unhealthy. A fiscal stimulus is a temporary dose of medicine designed to prop it up while the Fed uses monetary policy to get it on its feet for the longer term. The central bank is expected to announce a rate cut, possibly by as much as three quarters of a percentage point, when its Open Market Committee meets later this month.
So why the lack of detail today? Politics makes economic stimulus packages notoriously difficult to implement. Speaking at a press conference shortly after the president's remarks, Treasury Secretary Henry Paulson and Edward Lazear, chairman of the Council of Economic Advisers, acknowledged as much.
"We intentionally don't want to be overly specific, because … we're looking to be collaborative," Paulson said.
Even before the president made his remarks, presidential candidate Sen. Hillary Clinton, D-N.Y., blasted the proposal everyone was expecting, saying it "shortchanges the 50 million Americans who most need an economic 'shot in the arm.'" She has proposed a $110 billion plan that includes $40 billion in tax rebates, $30 billion in housing assistance for states and localities and a 90-day moratorium on foreclosures.
Of the presidential candidates with fiscal plans, those proposed by senators are the most important to watch--they have a say in what the current response will look like. In addition, they provide a bead on what Democrats are thinking. Sen. Barack Obama, D-Ill., has pitched a $75 billion plan that includes temporary tax rebates and $250 bonuses for Social Security recipients, as well as $45 billion in reserve if more stimulus is needed. The White House is not likely to endorse an expansion of government programs.
On the Republican side, Arizona Sen. John McMain is not going for a quick fix, but wants to the see the corporate tax rate cut from 35% to 25% and a permanent tax credit for businesses' research and development.
In order to be successful, the effects of the plan need to be felt within the next 12 months, Fed Chairman Ben Bernanke told a Congressional panel Thursday.
Could a short delay in the details lead to real compromise very soon? Here's hoping.
Washington, D.C. - Worried about the economy? So is Washington. But despite speculation that President Bush would provide some details of a plan to lift the economy out of its current slump, neither he nor two of his top economic advisers offered up anything concrete in separate remarks Friday. Petulant markets hated it, but it was a smart move.
Bush said a fiscal stimulus package is necessary, and that it must be "built on broad-based tax relief," that it should not include tax increases and that it needs to be about 1% of gross domestic product (about $145 billion) in order to be effective. Bush’s advisers said that relief would go to “those who are paying taxes,” essentially meaning that only those taxpayers who earn enough to owe income taxes will receive relief. That's a source of disagreement with Democrats, who want to see lower-income folks who pay Social Security but not income taxes get relief in the form of a rebate check too. And no one indicated when Americans might receive their relief checks. U.S. markets dropped on the remarks.
Investors hoped media reports were accurate, that the president's package would include a tax rebate of up to $1,600 for households and $800 for individual tax filers, possibly by temporarily doing away with the 10% tax bracket. It is known that Bush wants to see tax incentives for businesses and that he will not seek permanent extension of tax cuts that are set to expire in 2010. The president is expected to push for that goal separately.
Nearly everyone--from leaders in Congress to the Fed to the White House--agrees that the economy is unhealthy. A fiscal stimulus is a temporary dose of medicine designed to prop it up while the Fed uses monetary policy to get it on its feet for the longer term. The central bank is expected to announce a rate cut, possibly by as much as three quarters of a percentage point, when its Open Market Committee meets later this month.
So why the lack of detail today? Politics makes economic stimulus packages notoriously difficult to implement. Speaking at a press conference shortly after the president's remarks, Treasury Secretary Henry Paulson and Edward Lazear, chairman of the Council of Economic Advisers, acknowledged as much.
"We intentionally don't want to be overly specific, because … we're looking to be collaborative," Paulson said.
Even before the president made his remarks, presidential candidate Sen. Hillary Clinton, D-N.Y., blasted the proposal everyone was expecting, saying it "shortchanges the 50 million Americans who most need an economic 'shot in the arm.'" She has proposed a $110 billion plan that includes $40 billion in tax rebates, $30 billion in housing assistance for states and localities and a 90-day moratorium on foreclosures.
Of the presidential candidates with fiscal plans, those proposed by senators are the most important to watch--they have a say in what the current response will look like. In addition, they provide a bead on what Democrats are thinking. Sen. Barack Obama, D-Ill., has pitched a $75 billion plan that includes temporary tax rebates and $250 bonuses for Social Security recipients, as well as $45 billion in reserve if more stimulus is needed. The White House is not likely to endorse an expansion of government programs.
On the Republican side, Arizona Sen. John McMain is not going for a quick fix, but wants to the see the corporate tax rate cut from 35% to 25% and a permanent tax credit for businesses' research and development.
In order to be successful, the effects of the plan need to be felt within the next 12 months, Fed Chairman Ben Bernanke told a Congressional panel Thursday.
Could a short delay in the details lead to real compromise very soon? Here's hoping.
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