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Paulson upbeat despite economy woes

  • Story Highlights
  • Treasury Secretary Henry Paulson says U.S. economy in a "tough patch"
  • Paulson says economic stimulus plan will make "real difference" starting in May
  • Some lawmakers say Bush administration failed to address problem soon enough
  • Paulson: "Every economy goes through some ups and downs"
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WASHINGTON (CNN) -- The U.S. economy is going through a "tough patch," Treasury Secretary Henry Paulson said Sunday, insisting that the proper steps were being made to turn things around.

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Treasury Secretary Henry Paulson says the No. 1 priority in the economic arena is to minimize instability.

An upbeat Paulson refused to say whether he believes the economy is in a recession.

"I'm not focused right now on what you call it," he told CNN's "Late Edition with Wolf Blitzer."

"We know the economy has slowed down, and the American people know it's slowed down. So the important thing is, what do you do about it?"

A number of economists have said they believe the U.S. economy is already in a recession, which many economists define as two successive quarters of negative economic growth.

A top Senate Democrat, Charles Schumer of New York, Sunday accused President Bush of having failed to act on the nation's critical economic troubles in a way "reminiscent of Herbert Hoover" around the time of the Great Depression.

But Paulson said the $170 billion economic stimulus plan President Bush signed last month "is going to make a real difference" starting in May, when the first electronic payments are to be made. Video Watch Paulson explain why he is confident about the economy »

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The package will pay $600 to most individual taxpayers and $1,200 to married taxpayers filing joint returns, so long as they are below income caps of $75,000 for individuals and $150,000 for couples. There is also a $300 per child tax credit.

The rebates will put the money in the hands of individuals in the hope that they will spend it and boost the faltering economy.

Though the country lost 85,000 jobs during the first two months of 2008, Paulson said those figures did not tell the whole story.

"Remember, we had 52 months where we added jobs to the economy; unemployment is 4.8 percent," he said. "If the stimulus package works, we will add 500,000 to 600,000 additional jobs this year."

Home foreclosures are also up as the subprime mortgage market continues to founder, with 223,000 reported last month versus fewer than 140,000 in February 2007. But Paulson again expressed confidence. "We've been focused on that early," he said, citing legislation in Congress to help 300,000 struggling subprime borrowers.

Some lawmakers have said the administration failed to address the mounting problem when it should have. Critics of the new legislation believe it may not help as many borrowers as the government suggests.

Paulson said the tumble in home prices resulting from the mortgage mess is not necessarily bad. "We had a number of years where there was unsustainable appreciation in home prices -- California, Florida, Arizona, Nevada -- and we're seeing a correction right now."

Paulson acknowledged that the dollar is weak, having dropped to a historic low against the euro amid inflation fears, but he downplayed its long-term significance.

"Every economy goes through some ups and downs," he said. "We are going through a tough patch right now in our economy. The long-term fundamentals are strong, and they compare favorably throughout the world."

Paulson defended last week's decision by the Treasury to bail out Bear Stearns, an investment bank heavily invested in the subprime mortgage market, but would not say what might have happened had the government failed to step in.

"I'm not going to speculate about what-ifs," he said. "I'm just going to say our clear priority right now -- our No. 1 priority, everything we're doing in the economic arena -- is to minimize instability, minimize spillover into the real economy."

He acknowledged that the nation's capital markets have been going through turmoil "for a while," but described the setbacks as "bumps in the road."

"There are going to be unpleasant surprises, you're going to find that an institution or so has problems and, when they do have problems, you work to deal with it," he said, adding that handling the matter occupied much of his weekend.

Paulson's positive view was countered by Schumer who accused the administration of having failed to take steps that have already moved the economy into recession.

"The president is, indeed, behaving like Herbert Hoover," Schumer told "Fox News Sunday."

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"We're in the most serious economic problem we've been in in a very long time, much worse than 2001. The president's hands-off attitude is reminiscent of Herbert Hoover in 1929, in 1930."

He added, "There is no confidence by Democrats, Republicans, leaders of Wall Street, leaders of Main Street in this administration. And it's a real problem that builds on itself." E-mail to a friend E-mail to a friend

All About National EconomyHenry M. PaulsonGeorge W. Bush

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