Bush turns his attention to economic stimulus

? President Bush pledged Thursday to unveil an economic stimulus plan next week that sources said would be twice the size of what had been under consideration, and was likely to include such Democrat-backed measures as state aid to create jobs.

Sources said the plan would include a larger-than-expected cut in the tax on corporate dividends, $100 billion or more in state aid spread during a 10-year period, a generous extension of unemployment benefits, and likely a speedup of tax rate cuts for all but the very highest earners.

The plan appeared aimed at answering criticisms that the administration’s tax policies favor the wealthy. In remarks at his ranch here, Bush expressed concern the package not be seen as a sop to the rich as Democrats have charged.

“I’m concerned about all the people,” the president said. “I understand the politics of economic stimulus — that some would like to turn this into class warfare. That’s not how I think.”

Sources said the price tag on the new, enlarged White House package could run as high as $600 billion through its 10-year life. Most speculation to date has pegged the cost of the expected package around $300 billion.

White House officials apparently have decided the economy is sufficiently weak, and the political dangers to Bush sufficiently great, that they are brushing aside concerns about growing budget deficits to pay for the expanded stimulus plan.

Even without the new stimulus plan, the deficit already is expected to run $150 billion this fiscal year, according to the Congressional Budget Office.

The plan’s centerpiece will, as expected, be a sharp reduction in the tax on cash dividends that companies pay their shareholders,which would inordinately benefit wealthy investors. Sources said that the White House has decided to call for completely eliminating the tax for individuals at a cost to the government of $300 billion in lost revenues in the next decade. Administration officials previously suggested that they would only seek to halve the tax.

President Bush, right, says he'll announce his latest plan to stimulate the U.S. economy next week. The president made the announcement Thursday to journalists at his Texas ranch, where he is vacationing.

Such a move could provide a major boost for the stock market, which is still struggling to rebound from the worst decline in a generation.

But to quiet critics and improve the proposal’s chances of congressional passage, sources said the administration would package the dividend tax cut with an aid package to the states, an unemployment benefit extension and other measures that would primarily benefit low- and middle-income households.

To give the nation’s still-struggling economy the maximum possible boost, White House officials want to ‘front-load” the plan, scheduling its tax cuts and spending hikes to take effect in the first few years of the program. While it was previously thought the president would seek an immediate injection of no more than $40 billion in growth-spurring cuts and spending increases in the first year, sources said that he now plans to ask for double that, or more than $80 billion. The new proposal would come atop Bush’s 10-year, $1.3 trillion tax cut that Congress approved in 2001, and would not include money to fulfill the president’s pledge to make the previously approved cut permanent.

White House spokeswoman Claire Buchan refused to comment Thursday on the size or contents of the plan, saying Bush is “still reviewing his options.” The president is scheduled to unveil the proposal in a speech Tuesday in Chicago.

In finalizing the new package, Bush said what he has uppermost in his mind are those without jobs.

“What I’m worried about is job creation. And I’m worried about those who are unemployed. I am concerned about those who are looking for work but can’t find work,” he told reporters during a Thursday tour of his Texas ranch.

“And so next week when I talk about an economic stimulus package, I will talk about how to create jobs, how best to create jobs, as well as how to take care of those who don’t have a job,” he said.

President Bush leads journalists on a tour of his Prairie Chapel Ranch. Bush led the tour Thursday during his stay at his Crawford, Tex., property.