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January 8, 2008
Bush Admits Economy Faces Challenges
By SHERYL GAY STOLBERG and DAVID M. HERSZENHORN
CHICAGO - President Bush, in a marked shift from his usual upbeat economic
assessments, conceded here on Monday that the nation faces "economic
challenges" due to rising oil prices, the home mortgage crisis and a
weakening job market.
"We cannot take growth for granted," Mr. Bush said in a speech to a group of
business leaders in which he acknowledged that "recent economic indicators
have become increasingly mixed."
But even after a government report on Friday that showed unemployment jumped
to 5 percent last month from 4.7 percent in November, Mr. Bush stopped short
of warning that the nation may be about to enter a recession.
Democrats in Congress and on the campaign trail echoed the president's
sobering view. With a number of analysts now predicting that an economic
downturn could be imminent, both Mr. Bush and Congressional Democratic
leaders say they are considering whether a rescue package is necessary to
counter the threat of a recession, in which economic activity declines and
joblessness increases over an extended period of time.
But the two sides would undoubtedly take vastly different approaches,
setting up a clash that could dominate the 2008 election campaign and the
remainder of the Bush presidency.
If the past is any guide, Mr. Bush is likely to favor broad-based tax cuts
of the sort he pushed through early in his presidency. Democrats are
discussing more targeted relief - tax cuts, spending programs or a
combination of the two - to help lower- and middle-income Americans who
would be hurt the most if the economy falters.
"This is going to be a battle over doing more of what George Bush has done
for the past six years, or doing more for the middle class," Representative
Rahm Emanuel of Illinois, the chairman of the House Democratic Caucus, said
in a telephone interview after spending the day in Chicago with Mr. Bush.
"That's where the fissure is going to be."
The clash comes as the latest negative signs on the economy, coupled with
uncertainty in the housing and credit markets, have forced Mr. Bush to
abandon his usual sunny rhetoric and paint a darker picture of the economy's
condition.
After months of insisting that the economy's fundamentals are strong - a
theme he reiterated on Monday - Mr. Bush did not mince words. He
acknowledged that "many Americans are anxious about the economy," and he
noted that "jobs are growing at a slower pace." He said core inflation was
low - "except when you're going to the gas pump, it doesn't seem that low."
Still, the White House is not convinced it must act. The deliberations are
tightly held, and aides to Mr. Bush say he will not make a decision about
whether to offer a stimulus package, or what it should contain, until later
this month, in time for his State of the Union address scheduled for Jan.
28. Appearing in New York on Monday, Mr. Bush's Treasury secretary, Henry M.
Paulson Jr., echoed that approach, and cautioned against any rush to action.
"Working through the current situation and getting the policy right," Mr.
Paulson said, "is more important than getting the policy announced quickly."
On Capitol Hill, Democrats were positioning themselves to get ahead of any
proposal the White House might present. Aides to Nancy Pelosi, the House
speaker, said that she had yet to conclude decisively that a stimulus
package was needed, but that she had met with a group of economic advisers
last month who urged her to take swift action aimed at stabilizing the
jittery economy and lifting consumer confidence.
The group included Lawrence H. Summers, a Treasury secretary under President
Bill Clinton; Felix G. Rohatyn, the financier and former ambassador to
France; and Laurence D. Fink, the chairman and chief executive of BlackRock,
the global investment firm.
An aide to Ms. Pelosi said the three were "unanimous in saying that we
should move out ahead." In an interview over the weekend, Mr. Summers said
he believed that there was now a greater than 50 percent chance of a
recession this year.
"My view is that now is the time to be thinking about policies that would
provide recession insurance," Mr. Summers said, "and if we wait until it's
entirely clear that there is a recession, it will be too late."
But Democratic leaders said there was already a general consensus within the
party that any stimulus package would be temporary and targeted to the
middle class and the poor. Among the proposals under consideration are a
$500 across-the-board rebate, possibly to be returned to taxpayers in their
paychecks through the payroll tax system, as well as a plan to restore the
$1,000 per child tax credit to many low-income families that currently do
not qualify for it.
Polls show Americans are now more concerned with the economy than the war in
Iraq, a trend that is reflected in the presidential campaigns. In New
Hampshire on Monday, as the candidates furiously courted voters on the eve
of that state's crucial primary vote, pocketbook issues like the price of
home heating oil and health care took center stage.
"The economy's beginning to have some problems, which I'm worried about,"
Senator Hillary Rodham Clinton of New York told a group of voters on Monday
morning in Portsmouth, N.H. "We've got this energy crisis, with oil now at
$100 a barrel," she said, citing consequences "for our economy, for our
security, for the problem of global warming."
On the Republican side, Mike Huckabee, the former Arkansas governor, sounded
similar themes, recalling his humble roots as he tried to persuade voters
that he understood their "struggle." Gas prices, home heating costs and
health care bills keep going up, Mr. Huckabee said, "but your paycheck doesn't
go up to cover it."
As for the Bush administration, Mr. Paulson, the Treasury secretary, tried
to offer assurances that the White House is not standing still. He said the
administration may seek to expand a program begun last year to help
homeowners who cannot afford to repay subprime mortgages once they are
adjusted upward.
Mr. Bush had expected to spend his final year in office focused on foreign
affairs - he leaves Tuesday for the Middle East - and a few domestic issues,
like reauthorizing his signature education bill, No Child Left Behind.
But the president has had trouble getting credit for the economy even when
times were good, and he can ill afford to leave office on an economic sour
note. Mr. Bush is well aware that if he does not appear to share the public's
concern, he - and, more important for the 2008 elections, his party - could
easily look out of touch.
"I think Bush is looking not to give the Democratic candidate any more
ammunition than necessary," said Bruce Bartlett, a Republican economist who
has been highly critical of the administration. "If we are in the middle of
a recession in November, obviously the Republican Party is going to be
blamed for that."
Still, Mr. Bush must be careful not to depress the economy with pessimistic
talk, and so his speech in Chicago on Monday offered a delicate balancing
act. "People said, 'Are you optimistic?' I said, 'Absolutely, absolutely
optimistic,'" Mr. Bush said. "Do I recognize the reality of the situation?
You bet I do."
Bush Admits Economy Faces Challenges
By SHERYL GAY STOLBERG and DAVID M. HERSZENHORN
CHICAGO - President Bush, in a marked shift from his usual upbeat economic
assessments, conceded here on Monday that the nation faces "economic
challenges" due to rising oil prices, the home mortgage crisis and a
weakening job market.
"We cannot take growth for granted," Mr. Bush said in a speech to a group of
business leaders in which he acknowledged that "recent economic indicators
have become increasingly mixed."
But even after a government report on Friday that showed unemployment jumped
to 5 percent last month from 4.7 percent in November, Mr. Bush stopped short
of warning that the nation may be about to enter a recession.
Democrats in Congress and on the campaign trail echoed the president's
sobering view. With a number of analysts now predicting that an economic
downturn could be imminent, both Mr. Bush and Congressional Democratic
leaders say they are considering whether a rescue package is necessary to
counter the threat of a recession, in which economic activity declines and
joblessness increases over an extended period of time.
But the two sides would undoubtedly take vastly different approaches,
setting up a clash that could dominate the 2008 election campaign and the
remainder of the Bush presidency.
If the past is any guide, Mr. Bush is likely to favor broad-based tax cuts
of the sort he pushed through early in his presidency. Democrats are
discussing more targeted relief - tax cuts, spending programs or a
combination of the two - to help lower- and middle-income Americans who
would be hurt the most if the economy falters.
"This is going to be a battle over doing more of what George Bush has done
for the past six years, or doing more for the middle class," Representative
Rahm Emanuel of Illinois, the chairman of the House Democratic Caucus, said
in a telephone interview after spending the day in Chicago with Mr. Bush.
"That's where the fissure is going to be."
The clash comes as the latest negative signs on the economy, coupled with
uncertainty in the housing and credit markets, have forced Mr. Bush to
abandon his usual sunny rhetoric and paint a darker picture of the economy's
condition.
After months of insisting that the economy's fundamentals are strong - a
theme he reiterated on Monday - Mr. Bush did not mince words. He
acknowledged that "many Americans are anxious about the economy," and he
noted that "jobs are growing at a slower pace." He said core inflation was
low - "except when you're going to the gas pump, it doesn't seem that low."
Still, the White House is not convinced it must act. The deliberations are
tightly held, and aides to Mr. Bush say he will not make a decision about
whether to offer a stimulus package, or what it should contain, until later
this month, in time for his State of the Union address scheduled for Jan.
28. Appearing in New York on Monday, Mr. Bush's Treasury secretary, Henry M.
Paulson Jr., echoed that approach, and cautioned against any rush to action.
"Working through the current situation and getting the policy right," Mr.
Paulson said, "is more important than getting the policy announced quickly."
On Capitol Hill, Democrats were positioning themselves to get ahead of any
proposal the White House might present. Aides to Nancy Pelosi, the House
speaker, said that she had yet to conclude decisively that a stimulus
package was needed, but that she had met with a group of economic advisers
last month who urged her to take swift action aimed at stabilizing the
jittery economy and lifting consumer confidence.
The group included Lawrence H. Summers, a Treasury secretary under President
Bill Clinton; Felix G. Rohatyn, the financier and former ambassador to
France; and Laurence D. Fink, the chairman and chief executive of BlackRock,
the global investment firm.
An aide to Ms. Pelosi said the three were "unanimous in saying that we
should move out ahead." In an interview over the weekend, Mr. Summers said
he believed that there was now a greater than 50 percent chance of a
recession this year.
"My view is that now is the time to be thinking about policies that would
provide recession insurance," Mr. Summers said, "and if we wait until it's
entirely clear that there is a recession, it will be too late."
But Democratic leaders said there was already a general consensus within the
party that any stimulus package would be temporary and targeted to the
middle class and the poor. Among the proposals under consideration are a
$500 across-the-board rebate, possibly to be returned to taxpayers in their
paychecks through the payroll tax system, as well as a plan to restore the
$1,000 per child tax credit to many low-income families that currently do
not qualify for it.
Polls show Americans are now more concerned with the economy than the war in
Iraq, a trend that is reflected in the presidential campaigns. In New
Hampshire on Monday, as the candidates furiously courted voters on the eve
of that state's crucial primary vote, pocketbook issues like the price of
home heating oil and health care took center stage.
"The economy's beginning to have some problems, which I'm worried about,"
Senator Hillary Rodham Clinton of New York told a group of voters on Monday
morning in Portsmouth, N.H. "We've got this energy crisis, with oil now at
$100 a barrel," she said, citing consequences "for our economy, for our
security, for the problem of global warming."
On the Republican side, Mike Huckabee, the former Arkansas governor, sounded
similar themes, recalling his humble roots as he tried to persuade voters
that he understood their "struggle." Gas prices, home heating costs and
health care bills keep going up, Mr. Huckabee said, "but your paycheck doesn't
go up to cover it."
As for the Bush administration, Mr. Paulson, the Treasury secretary, tried
to offer assurances that the White House is not standing still. He said the
administration may seek to expand a program begun last year to help
homeowners who cannot afford to repay subprime mortgages once they are
adjusted upward.
Mr. Bush had expected to spend his final year in office focused on foreign
affairs - he leaves Tuesday for the Middle East - and a few domestic issues,
like reauthorizing his signature education bill, No Child Left Behind.
But the president has had trouble getting credit for the economy even when
times were good, and he can ill afford to leave office on an economic sour
note. Mr. Bush is well aware that if he does not appear to share the public's
concern, he - and, more important for the 2008 elections, his party - could
easily look out of touch.
"I think Bush is looking not to give the Democratic candidate any more
ammunition than necessary," said Bruce Bartlett, a Republican economist who
has been highly critical of the administration. "If we are in the middle of
a recession in November, obviously the Republican Party is going to be
blamed for that."
Still, Mr. Bush must be careful not to depress the economy with pessimistic
talk, and so his speech in Chicago on Monday offered a delicate balancing
act. "People said, 'Are you optimistic?' I said, 'Absolutely, absolutely
optimistic,'" Mr. Bush said. "Do I recognize the reality of the situation?
You bet I do."