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Welcome to "Ask the White House" -- an online interactive forum where you can submit questions to Administration officials and friends of the White House. Visit the "Ask the White House" archives to read other discussions with White House officials.

Henry M. Paulson, Jr.
Secretary of the Treasury

January 25, 2008

Henry M. Paulson, Jr.
The U.S. economy is fundamentally strong and will continue to grow in the short term. But, growth is slowing down markedly as the housing correction, capital market turbulence and high oil prices are taking their toll. So while I expect our economy to continue growing, the risks are to the downside. Recognizing this, the President decided that the time had come to take steps to protect our economy. He directed me to work with the Congress to enact an economic growth package quickly, to boost economic growth and job creation this year.

Yesterday, I joined Speaker Nancy Pelosi and Republican Leader John Boehner to unveil a bipartisan legislative package that has two main elements - one-year individual tax relief so that working Americans have more money to spend, and one-year tax incentives for businesses to invest and grow. Together, the legislation will inject about $150 billion into the economy in 2008, creating over half a million additional jobs by the end of this year.

Specifically, working Americans who have earned income of $3,000 or more will be eligible for a minimum rebate of $300 for an individual or $600 for a couple filing jointly. Based on the amount of federal income taxes paid, that rebate rises as high as $600 for an individual and $1,200 for a couple filing jointly.

In addition to the individual rebate, families will receive an additional $300 per child credit. The individual rebate and the child credit phase out starting at $75,000 in income for individuals or $150,000 in family income.

These provisions apply to 2008 only. We anticipate that the IRS will be able to begin sending rebate checks, based on 2007 tax returns, approximately 60 days after the legislation is enacted.

The legislation also includes two incentives for businesses to invest. First, bonus depreciation will allow companies to depreciate an additional 50% of their 2008 investments in equipment and software. Second, small businesses will be allowed greater expensing of 2008 investments.

Now let’s get to your questions.

Cliff, from Brimfield, Ohio writes:
Secretary Paulson:Will the Presidents economic plan have a QUICK effect or will it take time to see the results? And has the White House and the Fed been talking? Thank You

Henry M. Paulson
This bipartisan plan is designed to have an impact on the economy this year, by giving taxpayers some of their money to spend, and giving businesses an incentive to invest and grow this year. We are confident that these policies are effective at boosting the economy quickly. Economists largely agree that when checks were sent to taxpayers in 2001, they spent between one-third and two-thirds of the money in the short-term, and that spending resulted in more jobs and higher growth.

To have an impact on our economic growth this year, we have to work with the Congress to enact legislation quickly. I have been very engaged with leaders of both parties in Congress, who share our commitment to getting legislation in place that can boost economic growth and job creation this year. I’m glad we reached agreement with the House, but our work isn’t done until this legislation reaches the President’s desk.

Kim, from Kentucky writes:
Hi Secretary Paulson, I've heard some fearful speculation that our economy might be entering a downturn. Perhaps you could alleviate some of this anxiety by explaining exactly what is a recession, how quickly can one occur, and what are the best methods of stopping this from occurring? Thank You

Henry M. Paulson
Kim, you are right that our economy is slowing. In early 2006, we saw the beginning of a housing market correction – a necessary and inevitable correction after years of unsustainable home price appreciation. Last summer, the mortgage market and other financial markets began to reassess risk, and our financial institutions have tightened the availability of credit. In recent weeks, our economy overall has materially slowed.

You ask “exactly what is a recession.” There is no simple definition of a recession and no single measure that tells us when a recession has started. Officially, the referee who decides whether there has been a recession is a committee of economists from the National Bureau of Economic Research, in Cambridge, MA. Because they have to wait for economic data, they can’t tell if a recession technically occurred until months later.

While the committee has to wait for a while to tell us if we are in a recession, we know right now that the risks are to the downside, and the right thing to do today is act to boost our economic growth this year. That’s better for all Americans than waiting for data that tells us the state of the economy with a several-month delay. While the housing market correction is certainly taking a toll, I believe our economy will continue to grow this year, though at a slow pace. The U.S. economy is resilient and diverse. Exports are growing, and we are still creating jobs.

Steven, from North Canton, Ohio writes:
Dear Mr. Paulson, How does the president's plan for the economy intend to deal with the onslaught of cheap goods from foreign markets such as China and their negative effect on the economy?

Henry M. Paulson
The President has called for a short-term economic growth plan – it is focused on simple, temporary tax relief to create jobs this year. I know in Ohio, you are experiencing economic weakness, so getting this short-term plan in place can bring some real relief.

Your question is broader than that, so let me try to elaborate. First, our economy benefits from being open to trade. When we import lower-cost goods, your paycheck goes further – American consumers benefit from an increased diversity of products at lower prices. And trade has been a significant source of economic growth and job creation in the U.S. While other areas of our economy have slowed, our exports are up 13 percent over the year ending in November. And export-related jobs pay an estimated 13 percent to 18 percent more than the U.S. national average.

Rather than keep goods out of the U.S., we need to work to make sure we are trading on a level playing field. An open economy includes vigorous promotion of open investment, free markets, and trade. Through bilateral and multilateral negotiations, we are always pressing to further open markets in other nations to US exports. China today is our fastest-growing export market, and I am particularly focused there on increasing the access of U.S. firms to the Chinese market.

Dedric, from South Carolina writes:
I am an 18 year old college student, but i have also made more than $15000 in 2007. I was wondering how will this stimulus package affect me.

Henry M. Paulson
Under the agreement we worked out with the House of Representatives, assuming at least $3,000 of your earnings are from taxable wages, salaries, tips or earnings from self-employment, you’d qualify for the minimum $300 rebate. If your tax liability is greater than $300, you would get the greater amount (up to a maximum $600).

In addition, as a college student, you’ve got a strong interest in seeing that the economy is growing and creating jobs when you graduate. And that’s the goal of this effort. Direct tax relief for Americans will give families money that they can use any way they wish. This should increase consumer spending and lift our economy at a time when spending is otherwise slowing. Tax incentives for American companies to invest will help our economy in 2008 by encouraging businesses to expand operations and create new jobs.

Glen, from North Carolina writes:
In regards to the stimulous package. How can we spent money we don't have? We are running a deficit. Why can't we allow the markets to handle the situation? Government does not need to try to fix every problem.

Can you change government regulations to get out of the way of oil and gas shippments and by reducing the regulatory barriers let the markets solve the problem?

Henry M. Paulson
I understand your concerns about the deficit. As you probably know, last year the President put forward a budget for the government that is balanced in 2012. That is an important policy priority. That’s why we are focused on a growth package that’s temporary, and adds up to about $150 billion this year.

And let me say, our deficit for fiscal year 2007 was 1.2% of GDP – well-below the 40-year average of 2.4%. We are confident that we can take this short-term deficit increase and still balance the budget by 2012.

Donald, from Tampa, Florida writes:
A tax rebate sounds great we could sure use some relief out here in the real-world but the funding arriving in Summer 2008 in my opinion is too late to stimulate the current markets or my financial situation. Could the funding arrive in the next 30-60 days?

Henry M. Paulson
We are working closely with the IRS so that once legislation is enacted, we can process rebate checks as quickly as possible. We expect that the first checks will be ready to go out about 60 days after the legislation is enacted. And if we can enact this plan in the next several weeks, we can increase job creation by over half a million before the end of the year. So my goal is to work with the Congress to meet that timeline.

There’s an old Washington saying that fiscal stimulus doesn’t work because it comes too late – that the process of drafting and passing legislation takes too long and the stimulus doesn’t get out in time to make a difference. I believe we can get it done in time to make a difference this year. Members of Congress on both sides of the aisle have made clear that they share my sense of urgency. And we all largely agree that we should keep this effort focused on a few meaningful items – like tax reductions for individuals and families and investment incentives for business. Keeping it simple will make it easier for this process to move quickly.

Kathy, from Pensacola, FL writes:
Why don't the "rebate" go to mortgage companies for those of us who want to keep our homes from going into foreclosure?

That's what I'll do with mine if I get it and if it's not too late.

Henry M. Paulson
The good news is people can decide for themselves where they want to spend their rebates - after all - it is your money and you know best where to spend it.

I’m sure you won’t be the only one who uses her tax relief to help with mortgage payments. Many people over the last few years took out risky mortgages, with low introductory payments that go up considerably after 2 or 3 years. With home prices stagnant or falling, many of these homeowners aren’t able to refinance to avoid the higher adjusted payments, and are struggling to find ways to keep their homes.

In October, I joined a group of mortgage servicers, counselors, and investors as they launched a non-partisan alliance, called HOPE NOW to coordinate efforts to reach more struggling homeowners and help them find affordable solutions. This alliance brings mortgage servicers and the mortgage investors together in a coordinated effort to identify struggling borrowers early, connect them to a mortgage counselor and find a sustainable mortgage solution. The alliance is working hard to avoid preventable foreclosures and the industry is making progress. The industry assisted 370,000 homeowners during the second half of 2007. Just last week, HOPE NOW said mortgage servicers were modifying subprime loans in the 4th quarter at 3 times the rate of the 3rd quarter. Homeowners who are concerned about making their mortgage payments should call a non-profit counselor at 888-995-HOPE. Nothing is worse than doing nothing.

Mike, from Oregon writes:
Why would it be beneficial to simply 'gift' money to the taxpayers? Why not infuse money into the economy that would stimulate jobs? How about investing money in more infrastructure? This would stimulate construction, which is a key employer in our economy.

Henry M. Paulson
Hi Mike – I’ve heard that question a lot, for instance, from commuters across the nation who ask about highways and subways. On average, it takes eight years to bring a transportation project from conception to construction. Even for simple projects such as repaving, new funds would not immediately flow into the economy as they take too long to implement. We are focused on making an impact on the economy this year – and that means using policy tools that get money into our economy quickly. Cash to individuals will stimulate jobs – as individuals spend their rebates; together with the other provisions of the economic growth package, we should see over an additional half a million new jobs in our economy this year.

Brandie, from Zephyrhills, Florida writes:
while I understand that the economic growth package is only temporary, what steps are being taken to make lasting reform that will truly help the American Economy for decades to come?

Henry M. Paulson
Thank you for your question, Brandie. The President is pursuing several pro-growth policies to enhance long-term U.S. economic strength. These include making tax relief permanent so that millions of Americans won’t see their taxes go up in 2011. This not only includes income tax rates but also a broad array of tax relief for families – ending the marriage penalty and adding to the deduction for children. We also are focused on opening markets overseas for U.S. exports, which creates jobs in our export industries. The President has also called on the Congress to modernize FHA and create a new regulator for Fannie Mae and Freddie Mac, to improve the availability of mortgage financing for American homebuyers. Energy security is another important priority for our future economic health, and the President has put forward a plan to reduce our dependence on foreign oil by using more alternative fuels like ethanol. And one of the most critical things for our long-term economic health is education. The President has made it a top priority to reauthorize No Child Left Behind and work to make sure every child learns the skills they need to succeed.

Henry M. Paulson, Jr.
Thank you for all your questions. I hope my answers were helpful. I'm going back now to working with the Congress on this important economic growth package, to protect our economy in these turbulent times and create more jobs and greater prosperity for working Americans.

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