WASHINGTON – The statement by R. Glenn Hubbard, chairman of the Council of Economic Advisers, was the first by a high Bush administration official to forecast the nation's first recession in a decade. Hubbard added, in testimony to the Senate Budget Committee, that the slide could be reversed next year.
"The short-term outlook is not good ...(but) with prudent decisions by Congress and the administration, there's every reason to believe a recovery would commence in 2002,'' Hubbard said.
The economy has been slowing for more than a year and manufacturing, especially has been hard hit. There has been a growing consensus among analysts that the economy would be nudged into a recession as a result of the Sept. 11 terrorist attacks.
President Bush said he is nearing consensus with Congress on a stimulus plan that could boost the economy without doing long-term damage. ``There's no question our economy is hurting,'' he said, but stopped short of saying it is in recession.
After a breakfast meeting with Vice President Dick Cheney and congressional leaders, Bush said they were pursuing a plan that would encourage corporate investment and continuous demand for U.S. products. They have yet to agree on the size, he said.
``There is agreement that we've got to come together with a vision about how big the package ought to be to make sure we affect the economy in the short run in a positive way, but don't affect it in the long run in a negative way,'' Bush told reporters.
When asked whether the economy is in recession, Bush replied: ``You let the number crunchers tell you that. ... We don't need numbers to tell us people are hurting.''
After the meeting, House Minority Leader Dick Gephardt, D-Mo., said the hope is to determine a size for the relief, then agree on its elements. He said he wants the plan to address the needs of workers left jobless by the Sept. 11 tragedy who are ineligible for unemployment benefits, and to seek ways to generate demand for consumer goods. But, he cautioned, the stimulus shouldn't be so large that it triggers an increase in long-term interest rates.
Bush and lawmakers have been seeking an economic stimulus plan balanced between tax cuts for business and individuals, direct aid to the unemployed and some increased federal spending.
``This is a general feeling of what people tend to agree on,'' the Senate Finance Committee chairman, Sen. Max Baucus, D-Mont., said after speaking Monday with several senior administration officials. ``My guess is there will be a basic agreement to proceed along these lines.''
A senior Bush aide said the president wants three main components:
-Incentives to help businesses, such as accelerating depreciation and boosting expensing write-offs for equipment, eliminating the alternative minimum tax paid by some companies and possibly cutting corporate tax rates.
-Incentives to help individuals, such as providing a new round of tax rebates or hastening some of the tax cuts Bush pushed through Congress this year.
-Incentives to help displaced workers, such as extending unemployment benefits at least 13 weeks beyond the 26-week maximum, helping people pay for health insurance and more than doubling the roughly $200 million-a-year Labor Department emergency grant program.
``I think they're going to take a look at a variety of possible options that include some tax cuts ... as well as some help for people who have lost their jobs,'' White House spokesman Ari Fleischer said.
Bush's meetings with House and Senate leaders of both parties have become a weekly fixture since the Sept. 11 attacks on New York and Washington, underlining the ongoing effort by Republicans and Democrats to present a bipartisan front whenever possible.
Bush was not expected to present the leaders with a detailed economic package, opting instead for broad principles.
The price tag for a recovery plan remains unclear, though many lawmakers seem inclined to follow Federal Reserve Chairman Alan Greenspan's suggestion of about $100 billion. That would include the $40 billion emergency spending bill passed to deal with the terrorist attack aftermath and the $15 billion airline aid measure.
Republicans have been focusing on tax cuts to boost the economy, but Democrats favor immediate relief for workers and higher spending for public works projects. A blend of the two approaches, minus such divisive issues as a capital gains tax cut, appears to be gaining favor in both parties.
``We must continue the cooperation and bipartisanship that has been working so well,'' Baucus said.