Bush calls for $145 billion economy plan

WASHINGTON – President Bush, acknowledging the risk of recession, embraced about $145 billion worth of tax relief Friday to give the economy a “shot in the arm. “Bush said such a growth package must also include tax incentives for business investment and quick tax relief for individuals. And he said that to be effective, an economic stimulus package would need to roughly represent 1 percent of the gross domestic product — the value of all U.S. goods and services and the best measure of the country’s economic standing.

“There is a risk of a downturn,” the president said in his remarks at the White House.

Treasury Secretary Henry Paulson, speaking after Bush’s remarks, 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.

Paulson said the largest part of the stimulus package would be targeted to individual taxpayers. One Republican official, speaking on condition of anonymity, said Bush was hoping to target about $100 billion toward individuals and about $50 billion toward businesses.

The president and Congress are scrambling to take action as fears mount that a severe housing slump and painful credit crisis could cause people to close their wallets and businesses to put a lid on hiring, throwing the nation into its first recession since 2001.

Bush said that Congress and the administration need to settle on a temporary economic package that could be implemented quickly to “keep our economy growing and create jobs.”

“Letting Americans keep more of their money should increase consumer spending,” he said.

Bush outlined several criteria for the package to meet: It must be “big enough to make a difference in an economy as large and dynamic as ours,” it must be built on “broad-based tax relief,” it must take effect right away but be temporary, and it must not include any tax increases.

Specifically, he called for tax incentives for businesses, including small companies, to make new and major investments this year. “Giving them an incentive to invest now will encourage business owners to expand their operations, create new jobs and inject new energy into our economy in the process,” Bush said.

He also called for tax relief for individuals — probably to come in the form of one-time rebates. But he did not say how much money Americans would get to keep or the amount of other tax incentives that could be in the package. Nor did Bush detail how the nation would pay for such a plan.

“Americans can spend this money as they see fit: to help meet their monthly bills, cover higher costs at the gas pump, pay for other basic necessities,” he said.

House Speaker Nancy Pelosi, D-Calif., has talked of a package totaling $100 billion or more. House Republican leader John Boehner of Ohio spoke of a bill in the range of $100 billion to $150 billion. Aides have said Bush does not believe the stimulus spending should be offset — or paid for — by any tax or spending changes elsewhere. Some deficit hawks want this but isn’t expected to be part of any package.

Speaking for about seven minutes, Bush called passing a growth package “our most pressing economic priority.” But he also used his announcement to defend his tax cuts, which are set to expire unless the Democratic-led Congress opts to extend them.

He acknowledged Americans’ fears of an economic downturn.

“The economy’s still creating jobs, though at a reduced pace,” he said. “Consumer spending is still growing, but the housing market is declining. Business investment and exports are still rising, but the cost of imported oil has increased.”

He said his advisers and many outside experts expect that the U.S. economy will continue to grow over the coming year, but at a slower rate than the past few years.

“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,” he said.

Bush said markets rise and fall, and there are times when swift, temporary action by the government can help ensure that market fluctuations do not undermine the economy. “This is such a moment,” he said.

“We’re in the midst of a challenging period,” Bush said. “And I know that Americans are concerned … But our economy has seen challenging times before. It is resilient.”

Bush has gone down the tax rebate road before. Back in 2001, he added refunds of up to $300 per individual and $600 per household as a recession-fighting element of the tax cut plan that had been the centerpiece of his 2000 campaign.

Economists said a reasonable range for tax cuts in the new package might be $500 to $1,000. A White House plan is looking at rebates of up to $800 for individuals and $1,600 for married couples.

Bush first signaled his support for the approach of income tax rebates for people and tax breaks for business investment in a conference call Thursday with bipartisan congressional leaders.

Democratic congressional leaders agree that tax relief should be in the package, but are working on a broader measure that would also include aid targeted to the poor and unemployed.

White House deputy press secretary Tony Fratto said there are many ways to get quick agreement. Bush chose to lay out “principles” with few specifics to the American people now, while bipartisan negotiations with Capitol Hill are taking place privately. The White House feels Bush was out of the mix for too long, because he was away for eight days in the Mideast while Democratic leaders talked almost daily about the need to stimulate the economy — and how.

The White House scheduled Bush to talk about a stimulus package twice on Friday. After the Roosevelt Room appearance, he left for a visit at a Frederick, Md., manufacturing plant.

Bush stops in Saudi Arabia for talks

RIYADH, Saudi Arabia – President Bush, on his first visit to this oil-rich kingdom, delivered a major arms sale Monday to a key ally in a region where the U.S. casts neighboring Iran as a menace to stability.

Bush’s talks with Saudi King Abdullah, which began over dinner and were continuing with late-night meetings, also were expected to cover peace between Israelis and Palestinians and democracy in the Middle East.

Coinciding with Bush’s trip, the Bush administration in Washington notified Congress on Monday that it will offer Saudi Arabia the chance to buy sophisticated Joint Direct Attack Munitions — or “smart bomb” — technology and related equipment, the State Department said. The administration envisions the transfer of 900 of the precision-guided bomb kits, worth $123 million, that would give the kingdom’s armed forces highly accurate targeting abilities.

The sale is part of an overall $20 billion weapons package for Saudi Arabia, administration officials say.

The arms packages are an important part of the U.S. strategy to bolster the defenses of oil-producing Gulf nations, such as Saudi Arabia, against threats from Iran. Saudi Arabia and other Gulf states, which have majority Sunni Muslim populations, harbor deep suspicions about Shiite Iran’s apparent designs to establish itself as a major power. They have reacted skeptically to the conclusions of a new U.S. intelligence estimate about Iran.

Congress already has been briefed on the entire arms package, which also includes the sale of the Navy’s Littoral Combat system. Lawmakers mostly see the deal as critical to maintaining relations with a war-on-terror ally. Some are opposed to the JDAMs portion out of concern that it gives Saudi Arabia a technical edge over Israel and the ability to attack it, but are unlikely to muster the two-thirds majority needed to block the sales.

The administration has assured lawmakers in closed briefings in recent months that there would be proper restrictions on the JDAMs sales to ensure they would not threaten to Israel. Israel also has said it does not oppose the deal.

As for the topic of rising oil prices, Bush national security adviser Stephen Hadley would only say “we’ll have to see” when asked whether Bush would raise the issue with the king. The Saudis are responsible for almost one-third of OPEC‘s total output.

Another item for discussion could be the democratic principles Bush has promoted during his trip. While Abdullah has tried to push some reforms on education and women’s rights and there have been limited municipal council elections, the king has been cautious and limited in his efforts. He apparently has been hampered by others in the royal family worried that fast changes could upset the country’s conservative clerics and citizens.

After arriving Monday afternoon in Riyadh from Dubai, Bush expected to hear Abdullah urge him to keep up the pressure on Israel to halt settlements in Palestinian territories. The administration was able to persuade the Saudis to participate in the U.S.-sponsored Mideast peace conference in Annapolis, Md., in November.

Bush enjoyed a warm embrace from Abdullah. He was staying a night at the monarch’s ranch — a rare show of hospitality to a visiting dignitary that reflects Bush’s hosting of Abdullah twice at his own ranch in Crawford, Texas.

And the king greeted Bush at the base of the steps of Air Force One — a gesture the president never affords foreign leaders visiting the U.S. A band played each country’s national anthem as the leaders walked on a red carpet behind a high-stepping uniformed officer carrying a gold sword.

The hospitality masked Bush’s deep unpopularity among ordinary Saudis.

A recent poll conducted for Terror Free Tomorrow, a bipartisan group whose goal is undermining world support for terrorism, found only 12 percent here view Bush positively — lower than Iran’s president or even al-Qaida chief Osama bin Laden — and more think warmly toward Iran than America. Top among the reasons are the chaos in Iraq that followed the 2003 U.S.-led invasion and the widespread Arab feeling that the United States is biased toward Israel and not serious in seeking Mideast peace.

A rare cold front brought clouds and rain to Riyadh for the visit. Tight security was evident: Hundreds of police cars have deployed along major roads and sharpshooters are on some rooftops. In one neighborhood, police using loudspeakers demanded that cars be removed from some streets as two helicopters hovered overhead.

Earlier in Dubai, Bush got a flavor of the cosmopolitan banking and business hub, whose glass skyscrapers and booming construction have turned it into the capital of Middle East hustle. The soaring Persian Gulf city-state was Bush’s second stop in the seven-state United Arab Emirates federation. On the first, in Abu Dhabi on Sunday, he delivered a gentle lecture on democracy to authoritarian Arab allies and attended an opulent picnic at a desert horse camp.

Bush engaged in a day of cultural diplomacy in Dubai. He stopped at the historic home of the city-state’s former ruler, now a museum, where a group of girls performed to Arabic music.He had lunch on cushions set in a circle with students of the Dubai School of Government. And he attended a gathering of a young leaders’ group, in a conference room atop one of Dubai’s signature buildings, the luxury hotel Burj Al Arab that is shaped like a tall ship sail.

Dubai is caught in the middle of the West’s efforts to crack down on business in and out of Iran to protest its nuclear ambitions. Dubai, with a powerful Iranian business community, is eager to maintain its lucrative financial ties with Tehran, but wary of angering the United States and the United Nations.

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