President Bush called for a $145 billion economic stimulus program today that the administration hopes can be a short-term solution that will offer relief to average Americans this year and quickly prime an economy that has been on the skids for several months.
The President's short late-morning statement was followed by an early afternoon press conference with Treasury Secretary Henry Paulson and Edward Lazear, chairman of the Council of Economic Advisors.
President Bush and Secretary Paulson were long on general goals and short on specifics, especially on how the stimulus package would help the troubled housing and financial sectors, presumably the reason for the stimulus package in the first place.
Secretary Paulson said President Bush is focused on broad-based tax relief, which Paulson said worked in 2001 and 2003."There are no silver bullets and nothing is perfect," said Paulson. "But there is plenty of evidence that if you give money to people they will spend it," he concluded.
According to published reports, the administration is considering a plan that may include $800 rebates for individuals and $1,600 for households, along with investment tax breaks for businesses, but Paulson would not confirm those numbers.
On the housing front, Paulson said the housing market badly needed to correct itself.
"We've had unsustainable growth for a long time," Paulson said.
The Treasury Secretary pointed to the administration's support of the HOPE Now Alliance, which seeks to help troubled homeowners avoid foreclosure, as well as support for FHA Modernization. A bill to modernize the FHA passed the House and Senate last year and is now in conference.
Secretary Paulson also said the administration supports raising the loan limit for the government-sponsored enterprises, but did not offer a specific threshold and said it need to be part of fundamental GSE reform.
Lawrence Yun, chief economist for the National Association of Realtors, said while he was surprised the press conferences offered so few specifics, he was encouraged by the administration's support for raising the conforming loan limit.
Yun said if the government raises the loan limit to $625,000 as has been discussed, it will bump up home sales by 348,000 units in 2008. He said along with increasing home sales, raising the loan limit would reduce inventories and strengthen prices.
"Once equity is boosted it gives homeowners more options to refinance," Yun said, adding that the NAR estimates it can prevent 140,000 to 210,000 homeowners from foreclosing.
The NAHB took a conciliatory tone, applauding President Bush for laying out broad guidelines for boosting a sluggish economy. "President Bush and the Democratic and Republican leadership in Congress recognize the need to act now to enact a short-term stimulus plan that will help to avert a recession," said NAHB President Brian Catalde. "We believe that any final package should address housing as a key component to help strengthen the economy."
Catalde said Washington policymakers must also take other actions to spur economic growth and stabilize the housing market. He called on the Federal Reserve to move aggressively to cut interest rates when the Federal Open Market Committee meets later this month.