/www.bloomberg.com/ By Simon Kennedy and Iain Rogers
Manchester, England, Nov. 25 (Bloomberg) -- President George W. Bush will offer a new plan to help accelerate the ``bumpy'' U.S. economic recovery that's now underway, Treasury Secretary Paul O'Neill said.
Forecasts are for growth to slow in the fourth quarter to around half the 3.1 percent annual rate of expansion between July and September. That's slower than the 3 to 3.5 percent range O'Neill once predicted for yearend growth.
``Early next year President Bush will propose new action for economic growth and job creation,'' O'Neill said in a speech to the U.K.'s Confederation of British Industry. He didn't specify what actions Bush may suggest.
With a Republican-controlled Congress taking office in January, Bush has said he will seek to make last year's $1.35 trillion tax cut permanent.
The administration has been getting advice on other possible steps. Businesses are seeking a 75 percent write-off for equipment purchases and changes in rules that will require them to pay billions of dollars to shore up their pension plans. Investors want to end the so-called double taxation of dividends.
On Capitol Hill, Republicans may try to speed up parts of last year's tax cut for individuals that are being phased in and to make permanent provisions that are set to expire. Democrats want to increase the minimum wage, extend jobless benefits, and temporarily suspend Social Security taxes to put cash into workers' pockets.
Targeted Cuts
O'Neill has suggested he prefers targeted tax cuts to broad- based reductions because only some parts of the economy are weak.
``The tougher part has been building broad-based momentum throughout the economy,'' he told the U.K. business leaders. ``Some sectors have been doing well, such as housing and auto manufacturing, while others, such as commercial airplane manufacturing and airline services have lagged.''
O'Neill said he was also continuing to craft proposals to pare the length of the U.S. tax code and free-up billions of dollars for investment. Tax avoidance, and the cost of complying with the tax system, means the U.S. could recover an additional $400 billion annually if the tax system were simplified, he said. ``There's a lot to be gained,'' O'Neill said.
Bush's Call
O'Neill, who again called the U.S. tax system ``an abomination,'' said Bush shares his view that the tax code is too complicated. He stopped short of saying the president would endorse a complete overhaul, however.
``The president got elected, I didn't,'' O'Neill said. ``The president is the final authority on how far we should go on the spectrum of simplification and fundamental tax reform.''
The economy has been further buffeted by external shocks, including the collapse of the ``dot-com fantasy,'' the terrorist attacks on New York and Washington, and corporate fraud. ``Pile those on top of a slowdown already present when President Bush took office, and you have a recipe for a bumpy economy,'' O'Neill said.
O'Neill cited low inflation, lean inventories, rising incomes, a 5.7 percent unemployment rate and the largest annual gain in productivity since 1983 as evidence of economic strength. A creation of a homeland security department, terrorism risk insurance and the lowest Federal Reserve interest rates for 41 years had helped underpin the economy, he said.
`Engines of Growth'
``Our policy proposals have been aimed at reigniting the engines of growth,'' he said. ``The United States has been working its way back to steady growth and we've made progress. We've been making a recovery throughout this year.''
He called on other nations to take steps to boost demand in their economies. ``The future of global growth depends on other nations around the world expanding their economic freedom as well, so that the United States isn't the sole engine for the world economy,'' he said.
O'Neill is on the last stop of a 10-day trip which included stops in Afghanistan, Pakistan, and India.
The Treasury secretary said private companies around the globe could aid the economic expansion by harnessing the best business practices of rivals.
``There is such a large gap between the productivity of the very best performers in every industry and everyone else,'' he said. ``This gap represents productivity improvement potential that requires only initiation, not the discovery of knew knowledge,'' he said.
Asked why the U.S. hadn't joined the U.K. in endorsing the Kyoto treaty on climate change, which calls for industrial nations to cut emissions by 5.2 percent from 1990 levels by 2012, O'Neill said he thought the treaty was a ``mistake because it seeks to regulate the environment at the national level.''