By Jeremy Pelofsky
WASHINGTON (Reuters) - U.S. President George W. Bush onWednesday argued the "genius" of the U.S. economy is itsability to withstand financial shocks, as he signed a bill toput $152 billion (77.4 billion pounds) in taxpayers' hands in abid to avoid a recession.
"I know a lot of Americans are concerned about our economicfuture," Bush said during the ceremony at which he signed the$168 billion, two-year economic stimulus package into law. Ofthat total, $152 billion is earmarked for 2008.
"Our overall economy has grown for six straight years butthat growth has clearly slowed," he said, acknowledging the"rough patch" the financial system has experienced as failinghome mortgage repayments fed a vicious cycle of creditpullbacks by lenders in recent months.
Bush said however that the U.S. economy had often overcomea wide range of adversities over the past several yearsincluding corporate scandals, war and recession.
"The genius of our system is that it can absorb such shocksand emerge even stronger," he said.
U.S. economic growth slowed to only 0.6 percent at anannual rate in the fourth quarter of 2007. House prices havebeen falling, and in January the U.S. job market shrank for thefirst time in 53 months.
That has led many economists to forecast that the UnitedStates will slip into a recession, and some have said it mayalready be in one. The Bush administration has steadfastlydenied that would happen.
To prevent one, the Democratic-led Congress and theRepublican Bush administration forged rare bipartisancooperation to hammer out the economic stimulus package, whichincludes billions of dollars in tax rebates due to be paidbeginning in May, as well as incentives for businesses to buynew equipment.
The package includes tax rebates of up to $600 perindividual earning $75,000 in adjusted gross income or less and$1,200 per couple plus $300 per child. Businesses would be ableto deduct half the costs of purchases of new equipment.
In a swipe at Democrats, some of whom stood behind thepresident as he spoke, Bush praised Congress for not includingother spending projects in the package.
"The members resisted the temptation to load up this billwith unrelated programs or unnecessary spending, and Iappreciated that," he said.
Democrats also did not mince words after the bill signing.Senate Majority Leader Harry Reid of Nevada said they wouldseek to do more to help middle class families and smallbusinesses that may be hurt by a possible recession.
"We have much more to do in the long term because many moreAmericans still need our help," he said.
Bush also pressed Congress to pass reforms to how housingfinance authorities Fannie Mae and Freddie Mac are regulated,modernize the Federal Housing Administration and permit statehousing agencies to issue tax-free bonds to help homeownersrefinance their mortgages.
WILL CONSUMERS SPEND AGAIN?
With consumers increasingly worried about a recession,getting them to spend the rebate checks may be the hard part.If households save the money or use it to pay off debt, theeconomic impact would be minimal.
A survey of 1,500 people, conducted by American CenturyInvestments, found that 36 percent planned to use their rebatecheck to pay off debt, while a quarter intended to spend itright away. Another quarter said they would save or invest it.
Another survey done for the National Retail Federationfound that consumers plan to spend almost 41 percent of theirrebate which could offer nearly a $43 billion boost to theeconomy immediately.
In 2001 when the economy was last in a recession and thegovernment also handed out rebate checks, many consumers wenton a post-9/11 shopping spree.
Colin McGranahan, retail analyst with Bernstein Research inNew York, said worries of a severe recession should fade as therebates and interest rate cuts work their way through theeconomy, and the benefit will likely last through the thirdquarter of 2008.
Whether it can last beyond that is still in question ashouseholds struggle with falling home prices, a weakening jobmarket and rising costs for food and fuel.
"While the 2001 stimulus appeared to be successful instabilizing consumer spending and retail sales growth, thelarger 2008 plan will need to overcome the current housing andcredit conditions to keep consumer spending from returning to amore extended contractionary period," McGranahan said.
(Additional reporting by Emily Kaiser and Matt Spetalnick)