In last night’s State of the Union address, President Bush called for swift passage of a $150 billion program intended to counter slowing economic growth. Here’s what it means for businesses and the whole of the economy.

In his annual State of the Union address last night, President George W. Bush cited the housing slump, sluggish job growth and steep energy costs as slowing economic growth in the United States.

“At kitchen tables across our country, there is concern about our economic future,” the president told the nation in his final State of the Union address.

Despite the U.S. economy facing some potentially harrowing times — or, in political speak, “a period of uncertainty” — Bush assured the country that “in the long run, Americans can be confident about our economic growth.”

Bush urged Congress to pass what was the real economic headliner of the speech: a package being billed as an economic stimulus plan.

In an announcement earlier this month, President Bush said his proposed growth package should bolster both business investment and consumer spending, both of which are critical to economic growth. This would require two key provisions:

1) The growth package must include tax incentives for American businesses, including small businesses, to make major investments in their enterprises this year; and
2) The growth package must include direct and rapid income tax relief for the American people.

Giving businesses an incentive to invest now encourages business owners to expand their operations, create new jobs and inject new energy into the national economy in the process. Moreover, allowing Americans to keep more of their own money should increase consumer spending and lift our economy at a time when people otherwise might spend less.

Facing an unstable economy, the $150 billion package of tax rebates and other measures aimed at spurring consumer spending and investment was brokered between the White House and leaders of the House of Representatives last week, and the president last night called on Congress to “pass it as soon as possible.”

From the White House summary of policy initiatives:

Keeping America’s Economy Healthy: The bipartisan economic growth package would offer incentives to spur business investment. The growth plan provides approximately $100 billion in temporary relief that will allow Americans to keep or spend more of their incomes. … The agreement would save businesses approximately $50 billion in near-term taxes through a temporary change to the tax code that will allow American businesses that buy new equipment this year to deduct an additional 50 percent of the cost of their investment in 2008. This will encourage businesses to expand and create new jobs now, because buying equipment, software and tangible property this year will dramatically lower their taxes. The agreement also increases expensing for small businesses.

The package agreed upon by the Administration and House leadership does not raise taxes or include unnecessary spending or regulatory provisions.

President Bush also asked Congress to ensure the tax relief that is now in place is made permanent. The president claims this is “the most important action to ensure the long-term health of our economy.” If Congress allows the president’s tax cuts to expire at the end of 2010, as they are set to do, one of the proposed outcomes is that “26 million small-business owners would see their taxes increase by nearly 17 percent – or about $4,000 on average.”

However, the program is now facing resistance in the Senate as lawmakers seek to put their mark on it. In his address, the president warned Congress not to “load up the bill” with other measures.

“That would delay it or derail it, and neither option is acceptable,” the president said. “This is a good agreement that will keep our economy growing and our people working, and this Congress must pass it as soon as possible.”

Democratic congressional leaders said they would work with Bush and with the Republican minority in Congress on a “timely, targeted and temporary” boost for Americans amid the looming slowdown.

Bush last night also said the U.S. was working for a successful Doha round of trade talks, and must complete a “good agreement” this year. Bush also urged Congress to approve trade deals with Colombia, Panama and South Korea. (source: Reuters)

John Engler, president of the National Association of Manufacturers (NAM), praised last night’s State of the Union address, saying manufacturers “fully support the President’s focus on economic growth.”

“We are all agreed on the need to keep our economy strong,” Engler said in a statement from NAM. “The bi-partisan $150 billion growth package is a good start. And President Bush emphasized several other issues vital to the economy — among which are energy independence, tax reduction, promoting exports through more Free Trade Agreements and increased reliance on health care information technology.”

1/29 Update: The House overwhelmingly passed a $146 billion aid package this afternoon that would speed rebates of $600-$1,200 to most taxpayers. The plan, approved 385-35 after little debate, would send at least some rebate to anyone with at least $3,000 in income, with more going to families with children and less going to wealthier taxpayers. This new version of the economic stimulus plan still provides tax breaks to businesses to spur equipment and other purchases. The packages includes roughly $50 billion worth of tax incentives for businesses to invest in new plants and equipment.