Bush: Economy in slowdown, checks on the way

President George W. Bush makes a statement on the economic stimulus rebate checks at the White House in Washington, April 25, 2008.

25 April 2008

By David Lawder

WASHINGTON -President George W. Bush said on Friday the U.S. economy is in a slowdown but tax rebates that will start hitting consumers' bank accounts next week should help.

Bush spoke as a measure of consumer confidence hit a 26-year low.

"It's obvious our economy is in a slowdown," Bush said in urging taxpayers to contact the federal government about their eligibility for rebates amounting to as much as $600 per adult and $300 per child, depending on their income.

"The money's going to help Americans offset the high prices we're seeing at the gas pump and the grocery store and it will also give our economy a boost to help us pull out of this economic slowdown," he added before leaving the White House for a trip to Hartford, Connecticut.

U.S. Treasury Secretary Henry Paulson told Reuters on Thursday that the government had accelerated its schedule for distributing the rebate payments under a $152 billion economic stimulus package.

The Treasury had planned to start distributing payments in early May but will send nearly 7.7 million direct-deposit payments to Americans next week, Paulson said in an interview. It will pump $50 billion in rebate payments into the economy by the end of May and largely complete the distribution of more than $100 billion in rebates by the end of June.

Bush said the first paper rebate checks would be sent out on May 9. He urged Americans to file their tax returns with the Internal Revenue Service to ensure that they receive a check.

Bush has said the U.S. economy is experiencing a slowdown, but not a recession against a background of slumping housing prices and rising unemployment as well as increasing energy and food prices and continued declines in home prices in many areas.

GLOOMY SENTIMENT

But the Reuters/University of Michigan consumer sentiment index on Friday showed a more sour mood among Americans, hitting its weakest level in 26 years amid heightened worries over inflation and housing.

The April gauge fell deeper into recessionary territory, from 62.6 to 69.5 in March. As a result, Americans are increasingly likely to use their tax rebate to reduce debt or build savings, rather than spend on big-ticket items that would bolster economic activity.

Consumers worried about future living standards were reining in spending, the survey group said in a statement.

"Although the tax rebate will boost spending temporarily, the global rise in food and fuel prices, the declines in home values, and changes in credit conditions are likely to persist for some time and lengthen the period of stagnation in consumption," the group said. "Coupled with weaker job and income growth, these factors have the potential to cause deeper cutbacks in consumption than now anticipated."

The survey group said the data now point toward the likelihood of a relapse in spending later in 2008 and continuing into early 2009.

Democratic congressional leaders have been pushing for a second economic stimulus plan, such as increased unemployment benefits or more government spending on infrastructure.

Paulson told Reuters on Thursday he would be willing to listen to ideas from House of Representatives Speaker Nancy Pelosi, a California Democrat, about how to further aid the economy in connection with arranging a vote on the Bush administration's proposed Colombia free-trade agreement.

Paulson and Pelosi worked quickly in February to hammer out terms of the economic stimulus package that resulted in the tax rebate checks.