O'Neill says Bush's $75 billion stimulus plan would prevent prolonged slowing
Thursday, October 4th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ President Bush's plan to cut taxes, boost spending and extend unemployment benefits should assure that the U.S. economy does not suffer through a prolonged period of slow growth, Treasury Secretary Paul O'Neill said Thursday.
``We think it'll do the trick,'' O'Neill said on NBC's ``Today'' when asked about the proposed plan that would cost between $60 billion and $75 billion. Bush, meanwhile, planned to unveil his worker-relief package designed to aid workers affected by the Sept. 11 terrorist attacks.
The economy already is bouncing back from a downturn that has lasted more than a year, O'Neill said on CBS' ``The Early Show.'' ``I think it's great to see the kind of recovery we've hand over the last week or so. It's very reassuring. ... This is looking pretty good to us,'' he said, citing especially a pickup in consumers' credit card purchases.
O'Neill and Federal Reserve Chairman Alan Greenspan told lawmakers in separate appearances Wednesday that the government's future fiscal health and long-term interest rates could suffer if the stimulus package gets too expensive.
``It is really important that we work together not to include everything that people can imagine as part of this rifle shot,'' O'Neill told the Senate Finance Committee.
But even at the committee hearing, senators suggested many ways to help, from federal aid for a 3,000-mile natural gas pipeline from Alaska to Chicago to a $500 travel tax credit and a 100 percent business meal deduction.
Bush wants to accelerate income tax cuts currently set to take effect in 2004 and give tax rebates to millions of lower-income workers who didn't qualify for this summer's checks. The president also is pushing a 13-week extension of unemployment benefits, which now run out after 26 weeks.
Bush planned an appearance Thursday afternoon at the Labor Department to underscore his support for a the jobless-benefits extension. Bush also wants a fivefold increase in a department grant that can be used for a variety of workers' needs _ including job training, health care benefits, day care and paying the states' portion of unemployment benefits.
White House spokesman Ari Fleischer said the package is designed to help workers effected by the Sept. 11 attacks, not those whose jobs were impacted by the sluggish economy beforehand. He said Bush wants the worker-relief measures to be part of a broad economic stimulus package.
In addition, Bush wants several tax breaks for business _ some retroactive to Sept. 11, the date of the terrorist attacks. He has an open mind about a Democratic proposal to raise the $5.15-an-hour minimum wage, O'Neill said.
The package, Bush said Wednesday in New York, must ``provide a kick start to give people reason to be confident, and we will do that.''
The stock market responded in robust fashion Wednesday, with Dow Jones industrials rising 170 points to close above 9,000 for the first time since the terrorist attacks.
A few hours after Bush and O'Neill spoke, Greenspan and former Treasury Secretary Robert Rubin told congressional leaders in a private meeting that the economy, which some officials believe is already in a recession, clearly needs an additional stimulus of the size Bush is proposing.
Greenspan, who had previously counseled a go-slow approach, also said the package should be temporary, perhaps one or two years, according to participants.
At the size Bush is proposing, the action would bring the total economic stimulus since the terrorist attacks to well over $100 billion. Congress already has passed a $40 billion emergency spending package and a $15 billion airline aid plan.
Democrats generally agreed that Congress needs to act, even as they worried that a costly stimulus package would mark a return to deficit spending that could cause future fiscal problems such as higher interest rates. There is also some disagreement with Republicans about the specifics of any package.
``This is deficit spending once again and it's very disconcerting to many of us,'' said Senate Majority Leader Tom Daschle, D-S.D. ``But I don't know that there's an alternative. We are in an economic and military and security emergency.''
Bush officials said O'Neill's testimony amounted to a roadmap of what the president wants. It includes:
_Accelerating some of the income tax cuts that are part of this year's 10-year, $1.35 trillion tax relief package, so that the 1 percentage point reductions planned in 2004 would take effect in 2002. This would fatten the paychecks of millions of taxpayers but would make no change in the two bottom tax rates.
_Providing a new round of tax rebates to about 30 million workers who missed this summer's checks because they pay only Social Security payroll taxes and not income taxes. Several lawmakers want rebate checks to arrive just before the holiday buying season.
_Extending unemployment benefits by 13 weeks to address ``the human compassion aspect'' of the economic downturn. O'Neill said Bush also favors dramatically expanding a Labor Department grant that governors can use for a variety of worker needs, including job training and paying the states' portion of unemployment benefits.
_For business, accelerating depreciation that companies use to write off the cost of investment and increasing expensing write-offs for the purchase of equipment. These changes could be retroactive to Sept. 11 so that firms would spend money right away.