Bush urges economic fix

President Bush yesterday called on Congress to quickly pass a $150 billion economic stimulus package that would include tax breaks and incentives for consumers and small businesses.

Mr. Bush, announcing the financial “shot in the arm” that was originally set to be revealed in his State of the Union speech on Jan. 28, said there is “real concern” about the economy but sought to reassure investors and consumers about long-term financial prospects.

“We’re in the midst of a challenging period, and I know Americans are concerned about our economic future,” Mr. Bush said. “But our economy has seen challenging times before, and it is resilient.”

Congressional leaders continued to negotiate the details of the deal — which is expected to include a rebate of between $300 and $800 for taxpayers — and said they hope to reach an agreement within a month.

Mr. Bush avoided any talk of recession and continued to insist that the U.S. economy has a “solid foundation.” But he admitted for the first time that the economy is in jeopardy.

“There is a risk of downturn,” Mr. Bush said. “Continued instability in the housing and financial markets could cause additional harm to our overall economy and put our growth and job creation in jeopardy.”

The Dow Jones Industrial Average yesterday fell nearly 60 points for the day, capping a week that saw a 4 percent slide.

On Thursday, the Dow plunged nearly 307 points in response to record losses at Merrill Lynch, a 27-year low in housing construction, a worsening manufacturing recession and financial troubles at credit insurance firms.

Quarterly earnings releases next week by key companies such as Bank of America, Apple, United Technologies and Microsoft will determine whether the current slide increases. Further bad news would intensify talk of a full-blown recession.

“Earnings next week are the only thing that the market has to hang its hat on. With the market in such a fragile condition, those earnings better be good, or we could see some severe selling,” said Richard Sparks, senior equities analyst with Schaeffer’s Investment Research in Cincinnati.

Treasury Secretary Henry M. Paulson Jr. described the stimulus plan as “getting money out quickly, when it can make a difference.”

“A huge part of this is going to be speed,” he said. “You give money to people quickly, they’re going to spend it.”

Democrats are proposing a $300 to $600 rebate check for consumers, but the rebate could go as high as $800, according to press reports.

Democrats also want to provide expanded unemployment benefits and additional food-stamp assistance for the poor.

The president yesterday gave few details of a potential package, instead focusing on “principles to guide the discussion,” a White House spokesman said.

Mr. Bush did say that any aid package has to be roughly 1 percent of the gross domestic product in order to make any impact, which comes out to roughly $150 billion.

Mr. Paulson also avoided giving details during a White House briefing, because, he said, he did not want to alienate lawmakers on Capitol Hill as the White House works with them to reach a deal.

Mr. Paulson said he thought tax rebates and incentives would be passed by Congress and on their way to taxpayers and small businesses “in time to make a real difference this year.”

He avoided giving any timeline but did refer to House Majority Leader Steny H. Hoyer’s statement this week that a package could be passed within 30 days.

Mr. Paulson also said that he expected the small-business incentives to create about a half-million jobs this year.

Democratic congressional leaders, who spoke with Mr. Bush on Thursday in a conference call, continued to respond positively to the president’s plans for a quick fix.

“I am encouraged and share the president’s view that we need prompt bipartisan action to strengthen our economy. I also agree that our focus must be on finding temporary measures that will do the job effectively,” said Senate Majority Leader Harry Reid, Nevada Democrat.

Mr. Hoyer, Maryland Democrat, said there is “broad consensus” on a plan that “puts money in the hands of low and middle-income Americans.”

Federal Reserve Chairman Ben S. Bernanke told Congress on Thursday that he approves of a stimulus package of up to $150 billion including middle-class tax rebates, investment tax breaks, and unemployment and food assistance for the poor.

• Patrice Hill contributed to this report, which is based in part on wire service reports.