WASHINGTON, Oct. 3 (UPI) -- Treasury Secretary Paul O'Neill told Congress Wednesday that President Bush wants a stimulus plan of between $60 billion and $75 billion to avert a severe recession triggered by last month's terrorist attacks in New York and Washington.
In prepared remarks, O'Neill told the Senate Finance Committee that he expects negative real growth in the current quarter, but that perhaps a real growth rate of 1 percent to 2 percent in the fourth quarter.
"The fourth quarter numbers will depend on how quickly consumer confidence rebounds," O'Neill said.
"The depth of this contraction, as well as the pace at which the economy returns to a healthy rate of growth, will depend in large part on how fast consumers regain their confidence and our success in incorporating new protections against possible terrorist acts without material reductions in productivity," he said in his prepared remarks.
O'Neil said the president asked him to work with Congress to develop an addition $60 billion to $75 billion stimulus plan for fiscal 2002. That would bring total government spending to well above $100 billion, or 1 percent of GDP, since the Sept. 11 attacks.
Congress has already approved $40 billion for meeting relief needs and increasing security measures, and has provided $5 billion in direct relief to the airline industry, with up to another $10 billion in loan guarantees to follow.
O'Neil said the outlook for 2002 suggested a return to normal growth rates as the economy responds to a several favorable developments including, stimulus from consumer spending, and aggressive interest rate cuts by the Federal Reserve during the first eight months of the year.
He also expected reduction of excess inventories would pave the way for future production gains and an easing of energy prices.
"The terrorist attacks of Sept. 11 created disruptions that swept through our economy very quickly," the treasury secretary said. "Our airways were shut down and all of the travel-associated industries effectively came to a halt. Consumers stayed home and, as a consequence, it now seems certain that when the numbers are tallied for the third quarter, they will show that our economy experience negative real growth."
The first comprehensive economic data on September -- to be released on Friday -- was not expected to provide much information on the effects of the attacks, although forecasters expect it will show an increase from the August unemployment rate of 4.9 percent.
Since the Labor Department surveys reflect employment in the early part of the month, workers affected by the attacks presumable showed up on the payrolls and were counted as employees, he said.
"We shouldn't be surprised to see a further worsening when the October figures are released, as the post Sept. 11 layoff announcements are translated into actual job losses," O'Neill to the committee.
O'Neil's testimony comes a day after a top Bush administration told the Senate that the nation is entering a recession.
Glenn Hubbard, chairman of the Council of Economic Advisers, told the Senate Budget Committee that though the physical damage of last month's attacks was "horrible" that alone did not force the economy into a recession.
The disruption of the financial systems, loss of life and effect on commercial aviation sent an already teetering economy into a real slump, he said.
