O'Neill: Economy Picking Up
WASHINGTON – Treasury Secretary Paul O'Neill said Tuesday the economy will resume robust growth rates much more quickly if Congress enacts an economic stimulus plan, which faces a decisive Senate vote this week.
O'Neill told the House Ways and Means Committee the U.S. economy is showing signs that the recession is ending and could return to growth rates as high as 3.5 percent by the end of 2002 "if we are able to pass still-needed economic security legislation."
"We see more and more signs every day indicating that the seeds for a recovery are there, and only need nourishing to speed the process of putting Americans back to work," O'Neill said in prepared remarks.
O'Neill also said the 10-year, $1.35 trillion tax cut enacted last year helped make the recession a shallow one and that the tax relief will continue to help the economy recover and government return to its budget surplus.
"The focus must be on restoring growth. Surpluses will then follow naturally," O'Neill said.
Despite O'Neill's urgings, it was far from certain that Congress would approve an economic stimulus bill.
Senate Majority Leader Tom Daschle said if the Senate fails Wednesday to end debate on the measure, a maneuver that requires a tough-to-get 60 out of 100 votes, the measure will be shelved, probably for good.
Most Democrats will not support the Bush-backed plan, and Republicans say a leaner version introduced by Daschle offers far too little. Signs that compromise was far from imminent, Daschle said Monday, became clear as Republicans began trying to add long-term, costly tax cuts to a bare-bones plan he said represents common ground.
"It appears the Republicans want to block something," Daschle, D-S.D., said after noting that the GOP frequently has labeled him an obstructionist. "I know there is plenty of opportunity for the blame game."
Without the bill, the Bush administration predicted in releasing its budget for the 12 months starting Oct. 1 that "it will mean fewer jobs, smaller growth in incomes and smaller budget surpluses." Even so, many economists, including Federal Reserve Chairman Alan Greenspan, say a stimulus bill is less critical now that the recession is appears to be ending.
Some House Republican conservatives want to turn stalemate on stimulus into a balanced budget for the fiscal year that begins in 2003. The $77 billion earmarked in Bush's budget for the stimulus measure would bring the plan within $4 billion of balance, said Rep. John Shadegg, R-Ariz.
"If the powers that be block a stimulus bill, then a balanced budget is within reach," said Shadegg, leader of a group of 70 House GOP conservatives.
The Bush administration is supporting a House-passed bill that would provide $89 billion in stimulus in 2002 and $73 billion in 2003. It would accelerate income tax cuts now set to take effect in the future and provide a new round of rebate checks of up to $600 aimed at lower-income Americans.
The bill would extend unemployment benefits by 13 weeks, help laid-off workers pay for health insurance and allow corporations and small businesses more generous tax breaks for new investment.
Daschle's bill, providing $69 billion in stimulus in 2002, includes the unemployment benefits extension, business tax breaks, tax rebate checks and an increase in Medicaid money to help states balance their budgets.
The biggest tax relief item in the new Bush budget proposal is $344 billion included for the first years of a permanent extension of the 10-year, $1.35 trillion tax cut enacted last year. That tax cut is now set to expire at the end of 2010 -- meaning millions of people could face a huge tax increase without the extension.
Aside from the stimulus package, the president also is proposing a range of tax credits or other breaks for health insurance, charitable giving, education, energy and business.
The highlights and 10-year cost estimates:
--A tax credit of up to $3,000 for families with two children to help low-income people afford health insurance. Cost: $88.9 billion.
--A tax credit of up to 50 percent of the first $5,000 of the costs of attending a public or private school for students who moved out of a failing public school. Cost: $4.2 billion.
--Credits to be administered by states for the development of single-family housing units. Cost: $15.2 billion.
--A tax deduction, beginning at $100 and eventually rising to $500 -- or $200 rising to $1,000 for married couples filing jointly -- for taxpayers who make charitable contributions but do not itemize. Cost: $32.6 billion.