WASHINGTON President George W. Bush on Wednesday sought to reassure Americans worried about volatile stock markets that the U.S. economy remained sound and well-positioned to weather recent big swings in prices.
Following a meeting with his top economic advisers at the Treasury Department next door to the White House, Bush also warned that he will veto any Democrat-inspired proposal to raise taxes, which he said would dampen prosperity.
The U.S. economy was "thriving," Bush said.
"We've got a record that proves taxes can be cut, economies grow, deficits reduced and wars fought," Bush told a small group of reporters invited to a 45-minute session with him at Treasury. "I'll veto bills that will cause taxes to go up."
The key message that Bush offered was that despite admitted problems with rising defaults in stressed housing markets, jobs were available and the U.S. and global economies were expanding.
"I would say that the underpinnings of our economy are strong ... strong employment numbers, low inflation, real wages are on the rise," he said. "There's a strong global economy, which means it's more likely somebody will buy our goods."
Top Democratic leaders fired back at Bush, saying higher health care, energy and college costs put the lie to his claim that average Americans were prospering.
"After six years of reckless spending in Washington, President Bush is the last person who should brag about fiscal responsibility," said House of Representatives Speaker Nancy Pelosi of California.
HOUSING AN ISSUE
As Bush spoke, U.S. stock markets were enjoying a third day of gains after a volatile few weeks in which prices had been beaten down badly on worry that tighter credit conditions on the back of a sharp housing slump could undermine growth.
Bush played down suggestions that problems in the housing sector that have ensnared some lenders and borrowers could spread and drag the economy into a downturn.
"There is a lot of liquidity in our system and liquidity will provide the capacity for our system to adjust," Bush said.
In a later appearance on CNBC television, Treasury Secretary Henry Paulson said problems in the housing market were centered in so-called subprime loans extended to less credit-worthy borrowers and implied a normal if extended correction was taking place.
"The fundamentals of the economy are very solid," Paulson said. "The markets have been unsettled ... largely because of disruptions in the subprime space. Risk is being re-priced."
In an interview on Fox News Channel, Bush acknowledged "an issue with housing" as defaults on subprime mortgages climb but said "a soft landing is kind of what it's looking like so far."
He insisted current laws were adequate for dealing with problems in the mortgage lending market and said firmly that any help that was offered should be to homebuyers facing potential foreclosure rather than to lenders.
"I think we ought to crack down on predatory lending. I don't think we need new law, we ought to enforce the law on the books," Bush said. "And then I think we ought to let the market work."
CHINA DOESN'T WANT TRADE WAR
During his meeting with reporters, Bush was asked whether record deficits in trade with China were putting the United States into a position of vulnerability as Chinese reserves of U.S. dollars have swelled into the trillions.
"It is not in China's interest to create a trade war with the United States," Bush said, adding that the best way to shrink the trade deficit was to boost U.S. exports to China.
He later told Fox News that it was highly unlikely Beijing would consider trying to drive the dollar's value down by selling its reserves as a retaliatory measure if the United States were to slap tariffs on Chinese imports.
"It would be foolhardy for them to do this," Bush said in the interview when asked about a European news report that said China was threatening such an option. Paulson echoed Bush's remarks during his CNBC interview, saying: "I think it's absurd, frankly."
(Additional reporting by Emily Kaiser, Tabassum Zakaria and Joanne Morrison)