US president George Bush used the official confirmation yesterday that the US economy was in recession to press for Congress to approve quickly a controversial economic stimulus plan weighted in favour of corporate America.
As widely predicted, the US National Bureau of Economic Research declared yesterday that the world's largest economy slipped into recession in March, bringing to an end a record decade-long expansion.
The Bureau said that the situation had been aggravated by the attacks of September 11th but that the recession began as far back as March. "I am obviously aware our economy is slow," Mr Bush told reporters at the White House. "We will do everything we can to enhance recovery. I hope Congress moves quickly on an economic stimulus package and I can sign it before Christmas." The White House is pressing for an economic stimulus package that would include large corporate tax breaks, but the Democratic-controlled Senate insists on including help for the tens of thousands thrown out of work since the September 11th attacks.
Senate Democrats are opposed to the $100-billion (€114 billion) Republican version of the stimulus package passed by the House of Representatives as it includes a retroactive repeal of the 1986 Alternative Minimum Tax designed to prevent profitable companies from using loopholes to pay few or no taxes. The tax measure is deeply unpopular in corporate America, where it has cost businesses more than $25 billion over 15 years. Democrats want a 13-week extension of jobless benefits, a 75 per cent federal subsidy for health insurance for the unemployed and $15 billion for homeland security. Senate Majority leader Tom Daschle said the package should include more measures to stimulate consumer spending.
The $67 billion alternative package proposed by the Senate has also been criticised because of its inclusion of a multimillion dollar programme to purchase specific agricultural products such as buffalo in a bid to boost prices. A major beneficiary would be Democratic donor, billionaire Ted Turner.
Many Democrats are critical of the $15 million aid and loan package for airlines in the wake of September 11th as it included nothing for laid-off airline industry workers. Boeing yesterday gave 2,900 workers layoff notices as part of the company's already announced plan to lay off as many as 30,000. The panel of six economists from top universities that declared the recession official only comes into being to declare peaks and troughs in the US economy. Its definition of a recession is more complex than the common rule of thumb of two straight quarters of contraction, which will not come about until after the end of the year. "The committee is satisfied that the total contraction in the economy is sufficient to merit the determination that a recession is under way," the Bureau's business cycle dating committee declared. It said economic activity peaked in March 2001, adding, "A peak marks the end of an expansion and the beginning of a recession."
A member of the panel, Ben Bernanke, later explained that the key factor was aggregate employment which peaked in March. "The other factors related to manufacturing, such as industrial production. Sales peaked earlier, suggesting the manufacturing recession had already began, but only by March did it appear to have spread to the rest of economy for a broader recession."
The September 11th attacks "clearly deepened the contraction and may have been an important factor in turning the episode into a recession," the committee said.
The last US recession began in July 1990 and lasted until March 1991.
