President Bush proposed $145 billion worth of tax relief as part of a plan to stimulate the U.S. economy amid fears that the subprime mortgage crisis and flagging consumer confidence could tip the country into recession.
The president's speech in the Roosevelt Room of the White House was short on details, but he said the plan, which represents 1 percent of the U.S. gross domestic product, "would be sufficient to provide a boost to the economy."
The president said the growth package "must be built on broad-based tax relief that will directly affect economic growth, and not the kind of spending projects that would have little immediate impact on our economy."
He called for unspecified tax rebates as well as tax breaks for small and medium-sized businesses. They "must be temporary and take effect right away, so we can get help to our economy when it needs it most," he said.
Stocks fell after the White House plan was announced as investors appeared to doubt how much of an impact it would have on the economy.
The stimulus package comes amid a spate of bad economic news in recent weeks, including a credit crunch prompted by the deepening subprime mortgage crisis, weak Christmas retail sales and falling consumer confidence. The shaky economy has sent jitters through worldwide financial markets.
Bush also called for a permanent extension of his 2001 and 2003 tax cuts. Most would otherwise expire in 2010.
Although the president's plan was at odds with some Democrats who have called for spending programs to boost the economy, both sides share consensus that the economy is precarious.
In his speech, Bush admitted "there is a risk of a downturn." Speaking after the president, Secretary of the Treasury Henry Paulson said he was confident of long-term economic strength, but that "the short-term risks are clearly to the downside, and the potential cost of not acting has become too high."
He 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.
"There's no silver bullet," Paulson said, "but, there's plenty of evidence that if you give people money quickly, they will spend it."
Senior aides to House Democrats and Republicans said in addition to included tax rebates for individuals, the emerging measure would contain tax breaks for businesses investing in new equipment, increases in food stamps, and higher unemployment benefits. They spoke to The Associated Press on condition of anonymity, since the talks are ongoing and lawmakers have promised not to reveal details.
Earlier Friday, House Speaker Nancy Pelosi said she wanted legislation enacted within a month and said the government must "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."
With additional reporting from The Associated Press