Bush to offer ideas for the economy
The president confers with congressional leaders and on Friday will outline 'temporary, effective measures to increase growth,' a spokesman says. Meanwhile, Fed's Bernanke supports a stimulus plan.
WASHINGTON — President Bush and Federal Reserve Chairman Ben S. Bernanke pledged help for the economy Thursday, but their words gave no comfort to Wall Street, which suffered one of its biggest declines of the last year.
The Dow Jones industrial average plunged more than 300 points, deepening the market's recent sell-off amid fears that government aid might be too late to avert a recession.
As sinking stock prices added urgency to negotiations between the White House and Congress, Bush signaled that he would set aside some of his most cherished long-term economic goals to approve a short-term rescue package.
The White House said the president would announce today his ideas for stimulus measures. Officials indicated that the president was focused on short-term actions -- implying that he would bend to demands from congressional Democrats that he not insist on making permanent the tax cuts passed in his first term.
"We're dealing with short-term concerns with the economy," White House spokesman Tony Fratto said. "The head winds that we're dealing with right now are things that we see over the next coming quarters. So we do want to try to pass something quickly."
Bernanke, testifying Thursday before the House Budget Committee, repeated that the Fed was ready to cut interest rates further. He also said that a fiscal-stimulus package in the $100-billion range would give a significant boost to the flagging economy, provided that the money was funneled to people who would spend it quickly.
"Getting money to people quickly is good, and getting money to low- and moderate-income people is good, in the sense of getting bang for buck," the Fed chief said.
Bernanke's statement amounted to a vote of confidence for many of the ideas now being discussed by congressional leaders of both parties, including individual tax rebates of at least $500, expanding food stamps, extending jobless benefits and other measures that could buoy consumer spending.
Financial markets, however, failed to draw encouragement from what they heard Thursday from Washington. Investors instead focused on another barrage of reports suggesting that the sinking housing market was far from bottoming and that the ill effects of that sector's crash were spreading to other parts of the economy.
Groundbreaking on new U.S. homes in December fell 38% from the previous year to an annualized level of about 1 million units, the lowest since 1991, the government said.
