President George W. Bush this week will unveil an economic plan totalling as much as $600 billion that will include aid for cash-strapped states and more benefits for the unemployed as he aims to win Democratic support for tax cuts, Republican sources said on Friday.
About $300 billion of the package will be earmarked for tax cuts, sources said. The plan will be unveiled tomorrow in a speech Bush will deliver in Chicago.
Proposals under consideration include $75 billion or more in federal grants to states, whose revenues have been eroded by the soft economy and volatile stock market. Bush is also considering paying a greater share of Medicaid, the joint federal-state health care programme for the poor.
The White House declined to comment. "All kinds of things have been talked about," White House spokeswoman Claire Buchan said. "The president has indicated he's still reviewing his options."
The key provisions will be a sharp reduction in taxes on dividends companies pay their shareholders, incentives to spur business investment and an acceleration of cuts in certain income tax rates.
Even before its official unveiling, Democrats went on the attack. Senate Democratic Leader Tom Daschle said the package was "misguided" because the benefits would "almost exclusively go to the wealthiest Americans".
Bush rejected the criticism, promising aid to the neediest Americans.
"I understand the politics of economic stimulus, that some would like to turn this into class warfare. That's not how I think. I think about the overall economy and how best to help those folks who are looking for work," Bush told reporters in Crawford, Texas, last Thursday.
Reaching out to Democrats, who hold the key to passage in the narrowly divided Senate, Bush will ask Congress to immediately extend federal unemployment benefits for more than 750,000 Americans, whose benefits expired on December 28.
In addition, sources said, the administration is considering proposals backed by Democrats and some Republicans that would provide highway construction money and $75 billion or more in federal grants to states.
Some Republicans were less enthusiastic about that aspect of the program, and one lobbyist referred to it as a "give-away to states" that he thought would do less to help the economy than tax cuts.
Serious consideration is being given to a proposal for the federal government to pay a bigger share of Medicaid. The Senate approved legislation last year that would have temporarily increased the federal share by $6 billion and provided $3 billion in grants for state social service programmes. But the bill stalled in the Republican-controlled House of Representatives.
Including health care money for states could help Bush win key Democratic votes for his tax cuts. The Medicaid proposal is backed by Democratic Sens. Ben Nelson of Nebraska and Jay Rockefeller of West Virginia.
But a spokesman for Nelson, David DiMartino, said inclusion of the Medicaid funding was not enough to garner the senator's support.
"He's going to look at the plan on the whole. There's not one single issue that, if included, would guarantee his vote," DiMartino said, adding that Nelson had raised concerns about Bush's proposal to cut taxes on dividends.
It is unclear how much the entire economic plan would cost, and whether Bush expected Congress to act on a single package or several smaller bills. Keeping it together could help draw Democratic votes. But that could result a politically damaging delay in approving unemployment benefits, which both parties say is a top priority.