Bush Considering Economic Stimulus Package

Despite his stated belief that the nation's economic underpinnings are sound, President Bush said in an interview with Reuters yesterday that he was considering an economic stimulus package proposal later this month after Congress returns to Washington. Such a package would likely consist of new tax cuts and a push to make the Bush tax cuts of 2003 permanent. Those tax cuts as currently constituted are set to expire in 2011.

Although Democrats will almost certainly oppose any proposal for tax cuts, believing as they do that the 2003 tax cuts are already unaffordable in a time or war, the debate over a stimulus may not be so easy for them to control. The proposal would inject a dose of traditional party politics into the presidential race as well as the Congressional elections in November. Democrats won control of Congress in 2006 partly on the strength of a group of moderate freshmen who won races in traditionally Republican leaning districts. Those freshmen would be hard pressed in an election year to support tax increases, or be seen as standing in the way of tax cuts.

Presidential adviser Ed Gillespie summed up the Administration's thinking while declining to outline any possible policy proposal.

"We shouldn't have the economy and consumers and investors wonder whether or not those tax cuts will expire; that's not healthy at a time when we cannot take economic growth for granted. We'll do what we think is appropriate to continue to foster economic growth."

President Bush will meet with his Treasury secretary, Henry Paulson, and Federal Reserve Chairman Ben Bernacke today ahead of a planned speech on the economy in Chicago on Monday. The meeting could be the beginning of policy formulation by the White House, or it could be to put the finishing touches on a package of tax cuts. The White House is holding its cards close to the chest.

A debate in Congress over taxes would immediately become a driving issue in the presidential election. All of the Democratic candidates have, to one degree or another, pledged to eliminate the Bush tax cuts, at least on wealthier Americans. The Republicans generally support the cuts and seek to expand them and make them permanent. In an election year originally forecast to be about Iraq, national security, health care, and the environment, bread and butter issues of taxes and spending appear to be gaining in prominence as the war in Iraq quiets down.