Bush, Bernanke both back lift for economy

By Caren Bohan and Glenn Somerville

WASHINGTON (Reuters) - A consensus that the struggling U.S. economy needs rescue emerged on Thursday as the powerful Federal Reserve chairman backed the idea and President George W. Bush urged a quick and temporary fiscal package.

Amid worries that the United States may already be in a recession, Bush held a conference call with Democratic and Republican lawmakers in which he discussed the principles of what he would like to see in a stimulus plan.

Tax rebates, credits for business investment and extensions of unemployment insurance are among ideas being discussed.

"The most important thing is that they should be temporary, they need to be effective, they need to be things that we can get done quickly," said White House spokesman Tony Fratto.

Bush will make remarks about his ideas for boosting the economy on Friday, said Fratto, who added that the president would discuss what types of approaches he favors but not give any dollar figures or other specifics.

Fed Chairman Ben Bernanke told a congressional committee he supported the idea of a short-term fiscal stimulus measure.

A proposal in the range of $100-150 billion would help, Bernanke said, stressing that it was "critically important" any legislation be designed to kick in quickly.

The sentiment toward rapid action was echoed by legislators.

House of Representatives Speaker Nancy Pelosi, a California Democrat, said she hoped a package could be hammered out and agreed upon by mid-February. "We have every reason to think, to be hopeful ... that we can get this job done," Pelosi said.

Before the call between Bush and the lawmakers, the White House made clear Bush had shifted from weighing the possibility of an economic package to deciding such action was warranted.

House Republican leader John Boehner of Ohio said the White House and Congress were talking about a package in the $100-150 billion range.

RARE COOPERATION

Just a few weeks ago, the prospect of an agreement between Bush and the Democratic-led Congress seemed slim. The two sides engaged in fierce battles last year over issues from health care and the budget to the Iraq war.

Bush, who just returned from a nine-day Middle East tour, had indicated before the trip that he was looking at economic options but also signaled he might include in any proposal the idea of making permanent his 2001 and 2003 tax cuts.

Such a proposal would be a non-starter with Democrats.

In a sign that reaching an agreement on specifics may still be hard to achieve, one congressional aide described the president as having taken a "hard line" in the call.

But other Democrats described the conversation in more favorable terms.

"I was encouraged by the conversation with President Bush today that there is broad agreement to act quickly and in a bipartisan manner on an economic stimulus package," said House Democratic Leader Steny Hoyer.

Pelosi said Bush's acknowledgment that a package was needed was "significant progress." She reiterated her view that the plan should focus on financial help for the middle class.

As the discussion in Washington has evolved since the beginning of the year, the economic news has grown bleak, with gloomy reports this week on retail sales and housing.

There have been loud calls for a measure to boost the economy from the campaign trail, where candidates are vying to succeed Bush in the November 4 election.

All three major Democratic candidates -- Sen. Hillary Clinton, Sen. Barack Obama and former Sen. John Edwards -- have offered plans containing spending and tax-cut ideas.

Republican Sen. John McCain on Thursday laid out a proposal for cuts in corporate tax rates and incentives for companies to invest in new equipment and research. One of his main Republican rivals, former Massachusetts Gov. Mitt Romney, is also getting ready to unveil a plan.

(Additional reporting by Thomas Ferraro, Donna Smith, Jeremy Pelofsky and Alister Bull; Editing by Chris Wilson)

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