Bush Endorses Stimulus

Updated from 11:52 a.m. EST

President Bush on Friday endorsed an economic stimulus package aimed at spurring the economy through rebates to taxpayers and tax breaks to businesses intended to move them to buy equipment.

The president said advisors and outside experts believe the economy will continue to grow, but at a slower pace than recent times and "there is a risk of a downturn." He said his administration would work with the Democrat-controlled Congress to work out a bipartisan plan on the scale of about 1% of gross domestic product.

"In a vibrant economy, markets rise and decline. We cannot change that fundamental dynamic," Bush said in his prepared remarks. "As a matter of fact, eliminating risk altogether would also eliminate the innovation and productivity that drives the creation of jobs and wealth in America. Yet there are also times when swift and temporary actions can help ensure that inevitable market adjustments do not undermine the health of the broader economy. This is such a moment."

Bush said the plan must be temporary, take effect right away and must not include tax increases. He provided little detail about the size of potential individual rebates for taxpayers or other components of the plan.

Treasury Secretary Henry Paulson, pressed by reporters for details later, said the administration intentionally is keeping details vague as it works out details with Congress. He said there is "strong, bipartisan support" for a temporary stimulus plan that is simple enough to enact quickly.

Paulson said 1% of GDP amounts to between $140 billion and $150 billion, the majority of which should be aimed at consumers or taxpayers, he said.

"The potential costs for not acting have become too high," Paulson said. "We must act today to help our economy."

The Dow Jones Industrial Average was down almost 40 points after the speech. The S&P 500 Index was off about 10 points.

As fear of a possible recession mounts, the Dow has slipped more than 1,105.61 points since the start of the year. The S&P 500 is off more than 135.1 points since the Dec. 31 close.

The financial sector, in particular, has been hammered as banks and financial institutions like Merrill Lynch(MER Quote) and Citigroup(C Quote) this week announced fourth-quarter losses of nearly $10 billion apiece, tied to a combined more than $30 billion in writedowns to securities tied to bad mortgage debt.

Citi also acknowledged weakening consumer growth, fueled by rising home loan, credit card and auto loan delinquencies. Those trends were also highlighted by recent warnings from credit card companies American Express(AXP Quote) and Capital One(COF Quote).

The president spoke a day after Federal Reserve Chairman Ben Bernanke, in an answer to a question after testimony on the economy on Capitol Hill, also endorsed a stimulus package. While not advocating either of the various measures floated by Congress and the administration, Bernanke said a quick, temporary, and effectively targeted could augment monetary policy solutions to stem economic weakness.

Bernanke also reiterated his strong signal last week that the Fed was ready to cut its fed funds rate at its Jan. 29 meeting. The fed funds rate, which the central bank's Open Markets Committee has slashed a full point over its past three meetings, stands at 4.25%.

Bush said while quick passage of a temporary growth package is a priority, he urged Congress to eventually make permanent the temporary tax cuts due to expire in 2010.