Bush, Bernanke endorse economic stimulus

updated 6:46 p.m. ET Jan. 17, 2008

WASHINGTON - United for urgent action, the White House and Congress raced toward emergency steps Thursday to rescue the national economy from a possible recession, including tax rebates of $300 or more for many Americans.

Federal Reserve Chairman Ben Bernanke endorsed the idea of putting money into the hands of those who would spend it quickly and boost the flagging economy.

All the talk of rescue efforts failed to soothe Wall Street. The Dow Jones industrials plunged 306.95 points, underscoring deepening concern about the country’s economic health.

The sudden scramble to take action came as fears mounted that a severe housing slump and a painful credit crisis could cause people to clamp down on their spending and businesses to put a lid on hiring, throwing the country into its first recession since 2001.

President Bush told congressional leaders privately he favors income tax rebates for people and tax breaks for businesses, officials said. Bush spoke with congressional leaders as House aides worked behind the scenes on an emergency package that could also include more money for food stamp recipients and the unemployed.

The president did not push for a permanent extension of his 2001 and 2003 tax cuts, many of which are due to expire in 2010, one official said. That would eliminate a potential stumbling block to swift action by Congress, since most Democrats oppose making the tax cuts permanent.

Bush planned to lay out his position Friday, but he wasn’t expected to go into specifics. Press secretary Dana Perino said he would demand that any package be effective, simple and temporary.

Bernanke voiced his support for a stimulus package in an appearance before the House Budget Committee. He stressed that it must be temporary and must be implemented quickly — so that its economic effects could be felt as much as possible within the next 12 months. “Putting money into the hands of households and firms that would spend it in the near term” is a priority, he said.

Especially important is making sure a plan can put cash into the hands of poor people and the middle class, who are most likely to spend it right away, he said, though he added that research shows affluent people also spend some of their rebates.

He declined to endorse any particular approach, but he did say he preferred one that would not have a long-term adverse impact on the government’s budget deficit.

Bush and congressional leaders from both parties consulted via conference call Thursday for about 30 minutes. Both sides basically were in agreement that they needed to cooperate to do something quickly, Perino said.

“There is reason to be hopeful when the president recognizes there is a problem in the country,” House Speaker Nancy Pelosi, D-Calif., said afterward. She has talked of a package totaling $100 billion or more.

The rush to swing behind a stimulus plan underscored the political imperative of responding to a growing concern about the possibility of recession.

MORE FROM STOCKS & ECONOMY

Stocks & economy Section Front

Stock futures point to higher Wall Street open   Oil prices near $79 on weaker dollar Aging bull? Stocks may be in for rough ride Wall Street awaits stores’ reports this week Cost of gas nudges up 2 cents in last two weeks Jobless: 10 percent is tougher than it used to be Easing job losses point to wobbly recovery Unemployment rate rises above 10 percent When unemployment last topped 10 percent Obama signs homebuyer, jobless bill assistance Stocks & economy Section Front   Add Stocks & economy headlines to your news reader: