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Bush, Congress May Push for Stimulus Plan

The Bush administration and Congressional leaders, increasingly concerned about a possible recession, are moving closer to agreeing that an economic stimulus package is needed soon, Washington officials said Friday.

A Republican familiar with the administration’s thinking said Mr. Bush would present ideas to stimulate the economy, most likely in the form of tax relief, in his State of the Union message on Jan. 28. Mr. Bush will not decide on the details until he returns from the Middle East next week.

Democrats and Republicans on Capitol Hill are also suggesting that they might be able to put aside longstanding partisan differences and work on a stimulus measure, lawmakers and aides said Friday.

In a fresh sign of the possibility of an agreement on a roughly $100 billion package of tax cuts and spending to spur the economy, Nancy Pelosi of California, the speaker of the House, and Senator Harry Reid of Nevada, the majority leader, wrote to President Bush on Friday saying, “We want to work with you.”

On Monday, Mr. Bush acknowledged that Americans were “anxious about the economy” and said he was studying what actions to take. But this Republican, speaking anonymously to avoid pre-empting the White House, said, “If the decision was going to be ‘no,’ he wouldn’t have put that out there.”

Some Democrats say they could support tax relief focused on lower-income people and, perhaps, even tax cuts for corporations, if the White House and the Republican Congressional leadership accept some spending increases like extended unemployment benefits or aid to states to help them avert spending cuts.

Responding to Ms. Pelosi and Mr. Reid’s letter, Tony Fratto, a White House spokesman, said Mr. Bush had instructed aides to get views from all sides as he decided on a possible economic package.

“We would of course want to proceed in a bipartisan way,” Mr. Fratto said, adding Mr. Bush planned to meet, perhaps next week, with Ms. Pelosi and Mr. Reid to report on his Middle East trip.

Some lawmakers said that calls from the presidential campaign trail for limiting partisanship and changing the way Washington works were resonating on Capitol Hill, but that it would still not be easy for the administration and Democrats to bury their ideological differences on an economic rescue package. One model could be the bipartisan measure combining tax rebates, corporate tax relief and unemployment benefits that Congress approved in the last economic slump, in March 2002.

But these Democrats said the White House would have to agree not to try to attach favorite measures like repealing the estate tax or making permanent Mr. Bush’s 2001 and 2003 cuts, just as Democrats would have to refrain from attaching extraneous spending.

“It would make sense for the president to do something in a bipartisan way,” said Representative Charles B. Rangel, Democrat of New York and chairman of the Ways and Means Committee. “But I’m scared to death to even talk about tax rebates because of what that might open up.”

A senior Republican aide said: “Republicans will have to talk about making the tax cuts permanent and all that kind of stuff. Democrats are going to want things on their long-term agenda. But if you figure those cancel each other out, there’s probably a playing field where everyone can agree.”

Democrats appeared to be further along in their thinking than the administration, having decided in December to spend the early part of 2008 blaming Mr. Bush for the economic anxieties of the middle class. Until recently, Republicans in Congress and in the presidential campaigns have said the economy was healthy.

With the House returning next week, Representative Rahm Emanuel of Illinois, the House Democratic caucus leader; Representative James E. Clyburn of South Carolina, the Democratic whip; and Representative Barney Frank of Massachusetts, the chairman of the Financial Services Committee, plan to give major economic speeches in Illinois, Washington and at Harvard.

Democrats are also planning a party retreat at the end of the month where they are scheduled to hear from Ben S. Bernanke, the chairman of the Federal Reserve, among other economic experts. Ms. Pelosi plans to meet with Mr. Bernanke on Monday.

Still, some Bush administration officials say any action should be sooner rather than later. “Time will be of the essence,” Henry M. Paulson Jr., the treasury secretary, said Friday on Bloomberg Television. “So I think we want to do something as quickly as possible if we do it.”

The tone changed quickly over the last few weeks, especially after the level of unemployment grew, oil prices reached $100 a barrel, the stock market stumbled and the housing crisis worsened. Leading Republican and Democratic economists soon began voicing fears of a recession, with some even suggesting one had already begun. New polls show Americans are increasingly alarmed, and the topic has figured more and more in presidential debates. On Tuesday, New Hampshire primary voters in both parties cited the economy as their top concern.

Mr. Bernanke laid out a bleak picture of the economy on Thursday and suggested that the Fed would cut interest rates soon. That has made it more acceptable for lawmakers to discuss the need for actions to avoid being blamed for failing to respond.

The first presidential candidate, indeed the first leading Democrat, to offer a package was Senator Hillary Rodham Clinton of New York, who on Friday proposed $70 billion in spending for housing, heating subsidies and state aid and $40 billion in tax rebates if conditions worsened.

Mrs. Clinton’s package drew on the thinking of leading Democratic policy makers, many of whom served under President Bill Clinton and are advising Democratic leaders in Congress.

One of those advisers, Gene B. Sperling, was on Capitol Hill on Friday for meetings with Democrats. Mr. Sperling worked closely with Ms. Pelosi on the economic stimulus package that she brokered with Mr. Bush shortly after she became minority leader.

Leading Democrats said they envisioned a proposal of at least $100 billion, which economists say is the minimum needed to counter a recession that many for now say would probably be short.

Many Democrats are reciting what they call the “three T’s” for the stimulus package, that it should be temporary, timely and targeted to low- and middle-income Americans. The mantra is intended as a shield against Republican attacks that Democrats would go on a spending spree, as well as Republican calls to make Mr. Bush’s tax cuts permanent after they expire in 2010.

Republicans are expected to emphasize tax cuts for individuals and businesses. Kevin A. Hassett, director of economic policy studies at the American Enterprise Institute, said tax relief to spur business investment would be especially useful now.

“These issues aren’t really in dispute,” Mr. Hassett said. “If you want to do a stimulus package, it should juice up activity this year and then go away. But it has to have two components, one for individuals and one for business firms to spur capital investment.”

Mr. Hassett and other Republican economists also warned that a package that was caught up in grandstanding on both sides might come too late to do any good. In 1992, for example, after President George Bush invited Democrats to submit a stimulus package, both sides argued as the recession came and went.

But many Republicans said there was a risk of their seeming indifferent to the economic situation, especially to Americans in danger of losing their homes because of the subprime mortgage crisis, and a risk of holding a package hostage to their long-term tax-cutting agenda.

Democrats are hardly united, however. Some are likely to demand spending for public works as part of any package. Others say they are worried that they will be accused of violating the party’s promise to “pay as you go” by offsetting any tax cuts or spending increases with savings.

But most Democrats are saying that, at a time of an economic downturn, they do not need to stick to that promise.

“Once pay-go is set aside, you could really see the discussion take off,” a Democratic Congressional aide said. “You could start to align the House and Senate and then triangulate with the White House on what could be done on a faster track.”

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