US president George Bush has warned that the United States could face an economic downturn and called for a $145 billion "shot in the arm" to prevent the world's biggest economy slipping into recession.
In a seven-minute address at the White House yesterday, the president said he still expects the US economy to grow but at a slower pace than before and he acknowledged "areas of real concern", including slow job growth and a declining housing market.
He called on Congress to approve quickly a package of tax rebates and business incentives to stimulate the economy by encouraging consumer spending and business investment.
"By passing an effective growth package quickly, we can provide a shot in the arm to keep a fundamentally strong economy healthy. And it will help keep economic sectors that are going through adjustments, such as the housing market, from adversely affecting other parts of our economy," he said.
Wall Street was unimpressed by Mr Bush's plan, which some investors believe is too modest to turn the economy around - share prices resumed a week-long slide after the speech.
Mr Bush said the stimulus plan must be big enough to have an impact - about 1 per cent of the US gross domestic product. He gave no details of the tax relief plan yesterday but the administration has been talking to key figures in Congress about offering an $800 tax rebate to individuals and $1,600 to families.
"This growth package must be built on broad-based tax relief that will directly affect economic growth and not the kind of spending projects that would have little immediate impact on our economy. This growth package must be temporary and take effect right away so we can get help to our economy when it needs it most," Mr Bush said.
Democrats in Congress agree with the president on the need for a stimulus package but they want to go further than the White House by increasing financial aid to the states and extending unemployment pay beyond 26 weeks.
"I am encouraged and share the president's view that we need prompt bipartisan action to strengthen our economy," said Senate majority leader Harry Reid.
"I also agree that our focus must be on finding temporary measures that will do the job effectively."
With a deepening housing crisis, rising unemployment and declining retail sales, the US economy has moved to the centre of this year's presidential campaign in recent days.
Many of the candidates have proposed their own remedies, with Democrats calling for a stimulus package targeted towards the poor and the middle class.
Hillary Clinton, who outlined her own stimulus proposal last week and wants a 90-day moratorium on home repossessions, said yesterday that Mr Bush's plan would short-change the less well off. "I don't think it does enough," she said.
Republican frontrunner John McCain, who believes the best way to stimulate the economy is to cut corporate tax and offer investment incentives to business, expressed concern about some Democratic proposals. "I want to see where that money is going to come from.,"
Speaking after Mr Bush yesterday, treasury secretary Hank Poulson said that the collapse in house prices was affecting the entire US economy and that urgent action was needed.
"We must act now to support our economy this year," he said.
