WASHINGTON (AFP) — The administration of US President George W. Bush is mulling a series of economic measures amid fears the economy could be slipping into a recession, but analysts say further tax cuts would not offer enough help.
Concerns the US economy could be falling into a recession have been raised by a sharp housing slump, tightening credit, rising energy costs and other economic worries.
Such fears were exacerbated Friday when a monthly snapshot of the job market showed just 18,000 nonfarm jobs were created in December -- a four-year low -- while the unemployment rate jumped to 5.0 percent.
"The debate now is not about whether or not to provide macroeconomic stimulus. That question appears to be settled," Lawrence Summers, a former Treasury secretary, wrote in a Financial Times editorial.
Analysts say the US economy is now largely relying on the legendary American consumer to ward off a recession.
Speculation is mounting that Bush could unveil a stimulus package for the economy in his annual State of the Union address which he is due to deliver on January 28.
"Our most immediate goal is to minimize the impact on the real economy," Treasury Secretary Henry Paulson said Friday, according to excerpts from a speech delivered in New York.
"We recognize the importance of addressing these policy issues, and we are," Paulson said.
Economists also expect the government to unveil a stimulus effort amid expectations that economic growth will slow in coming months.
The Federal Reserve has cut US borrowing costs in recent months in a bid to keep economic momentum underpinned, but analysts say additional measures will be required to keep growth humming along.
"Fiscal stimulus is appropriate as insurance because it is the fastest and most reliable way of encouraging short-run economic growth," said Summers.
Analysts say the exact make-up of a potential package depends on the measures favored by the Bush administration. Bush previously has unleashed tax cuts to boost economic growth.
But analysts say the current economic climate will need more than tax cuts.
"It doesn't make any sense to manage your tax policy based on something temporary like the subprime crisis," said Michael Swanson, an economist at Wells Fargo bank, referring to troubled home loans given to Americans with poor credit.
Others said any new measures need not be permanent.
"Stimulus is all about temporary measures. Making tax cuts permanent is totally off point and using a potential recession as an excuse to pursue their agenda," said Jared Bernstein of the Economic Policy Institute.
Bush is urging Congress to make his tax cut program permanent; the cuts are due to expire between 2010 and 2011. Democrats have criticized the cuts as benefiting wealthier Americans.
The White House said it wants to see more reports on the economy before announcing any specific new programs.
"We want to make a determination certainly by the end of this month as to whether something for the short- and medium-term is needed," Bush spokesman Tony Fratto told reporters.
Some stimulus-backers say this time around, the less-wealthy need help, and that fresh measures would have to be implemented quickly.
"Having an extended benefits program ready to go if labor market conditions deteriorate significantly would be a prudent contingent stimulus policy," said Chad Stone, a chief economist at the Center on Budget and Policy Priorities.
Summers urged the Republican administration to act soon.
"Moving to implement such measures seems more prudent than waiting till the necessity of even greater ones has been unambiguously established by further pain," said Summers, who served as treasurer under former Democratic president Bill Clinton.
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