Paulson sees slower economy, to rush tax rebates
WASHINGTON (Reuters) - Treasury Secretary Henry Paulson on Wednesday stood by his view that the economy will avoid recession this year and grow at a slower pace, and that the Treasury will act quickly to distribute tax rebate payments.
"The U.S. economy is diverse and resilient, and our long-term fundamentals are healthy. I believe our economy will continue to grow, although at a slower pace than we have seen in recent years," Paulson said in prepared testimony to the U.S. House of Representatives Budget Committee.
President George W. Bush on Wednesday is expected to sign into law a $152 billion fiscal stimulus package that will provide tax rebates to some 130 million Americans, with most about $600 for an individual and $1,200 for a couple.
Paulson said the Internal Revenue Service would simultaneously manage the spring tax filing season and preparations for issuing the rebate payments starting in early May.
"Payments will be largely completed this summer, putting cash in the hands of millions of Americans at a time when our economy is experiencing slower growth," he said. "Together, the payments to individuals and the incentives for businesses will help create more than half a million jobs by the end of this year."
Paulson also called on Congress to aid the housing sector by passing legislation that will modernize the Federal Housing Administration and create a new, stronger regulator for Fannie Mae <FNM.N> and Freddie Mac <FRE.N>, the government-sponsored housing finance enterprises.
Under the stimulus plan, Fannie and Freddie will be temporarily allowed to invest in larger mortgages, providing more resources for refinancing troubled mortgages in costly coastal housing markets.
He also urged Congress to pass legislation that will allow states to issue tax-exempt bonds for innovative mortgage refinancing programs.
Paulson also repeated that he would work to help markets reprice risk and work through their current stress.
"While we are in a difficult transition period as markets reassess and reprice risk, I have great confidence in our markets. They have recovered from similar stressful periods in the past, and they will again," he said.
(Reporting by David Lawder, Editing by Chizu Nomiyama)