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Bush Looks to Reprise
Tax-Relief Measures
Stimulus Proposal
Echoes the Rebates,
Breaks Given in '01
By MICHAEL M. PHILLIPS
January 9, 2008

WASHINGTON -- Faced with recession fears, the White House is considering tax rebates for individuals to encourage spending and tax breaks for businesses to encourage investment, according to people familiar with the matter.

The plan, if finalized by the administration and passed by Congress, would mark President Bush's first major steps to address the broad economic slowdown. He has limited himself to addressing the wave of home foreclosures and the Wall Street chaos caused by the collapse of the subprime-mortgage market.

STIMULUS PACKAGE


• The News: The White House is considering a plan of tax rebates and breaks.
• The Background: Bush has limited his plans to addressing home foreclosures and the subprime turmoil.
• The Details: Options include a $500 tax rebate for individuals and tax breaks for businesses for equipment investments.With polls showing voters deeply concerned about their economic fortunes, the administration, congressional Democrats and the presidential candidates are competing to come up with responses.

In a Rose Garden press conference yesterday, President Bush said his administration will "look at all different options." He added: "We're watching very carefully, and we're listening to different ideas about what may or may not need to happen."

The president's main options include a tax rebate of perhaps $500 for individuals to encourage spending and a change in tax laws that would allow companies to deduct from their taxes a substantial portion of investments in equipment, according to people familiar with the discussions. President Bush is expected to prepare the economic-stimulus package before his State of the Union Address on Jan. 28.

The two measures at the top of the president's list would reprise his tactics during the economic slowdown faced during his early years in office. In 2001, while the economy was in recession, the Treasury sent checks of $300 or $600 to two-thirds of U.S. households during a 10-week period. The rebates represented advance payment on retroactive reductions in the lowest tax bracket, to 10% from 15%. In 2002, Congress, at Mr. Bush's urging, authorized companies to take deductions for 30% of the value of investments in equipment. The following year, Congress upped the so-called bonus depreciation to 50%, until it expired at the end of 2004.

The president is facing the prospect of leaving office with the economy in a slump. Last week, the Labor Department announced that the jobless rate rose to 5% in December, from 4.7% the previous month. Economists inside and outside the government are worried that falling home prices and rising foreclosures will lead consumers to cut back spending and tip the economy into recession. While the economy expanded at a pace of nearly 5% in the third quarter, economists predict the data will show a far more torpid performance for the final three months of the year.

House and Senate Democrats are working on a joint proposal to address the economic situation. "There's going to be things on the tax side and things on the spending side," said Sen. Charles Schumer (D., N.Y.), who is involved in the discussions. Sen. Schumer wouldn't elaborate as to what specific measures Democrats are considering, but he said if Mr. Bush "takes spending stimuli off the table, it's going to be hard to deal with him."

Presidential candidate Sen. Barack Obama (D., Ill.) has proposed a tax credit of as much as $500 a person, or $1,000 a family. Former Treasury Secretary Lawrence Summers, who supports Sen. Hillary Clinton (D., N.Y.), is pressing for a spending package of $50 billion to $75 billion.

While some economists argue that the recession-fighting is best left to the Federal Reserve, Martin Feldstein, the former economic adviser to President Reagan, has urged the administration and Congress to ready a stimulus package, but hold off on activating it until the economy has registered three straight months of declining private employment.

The liberal Center on Budget and Policy Priorities issued a report Monday that said in the case of a recession, the administration should put money quickly into the hands of those most likely to need and spend it. "The case for discretionary fiscal stimulus is not a slam dunk," the center's chief economist, Chad Stone, told reporters. Among the measures Mr. Stone said are most effective are increasing unemployment-insurance benefits, food stamps, individual tax rebates and federal aid to state governments.

Mr. Bush again urged Congress yesterday to extend broad tax cuts that are due to expire at the end of 2010, saying "in times of uncertainty, it seems like Congress ought to be sending a message that we're not going to raise your taxes in the next three years."