Bush says optimistic economy will regain strength

NEW YORK (Reuters) - President George W. Bush, seeking to bolster faith in the economy amid fears of a recession, acknowledged on Friday the United States was going through hard times but said growth would resume over the long run because economic fundamentals were sound.

"These are tough times," Bush told the nonpartisan Economic Club of New York. "The economy shed more than 80,000 jobs in two months. Prices are up at the gas pump and in the supermarket. Housing values are down. Hard-working Americans are concerned."

But Bush said there were also bright signs with the economy, including low unemployment at 4.8 percent, higher wages and productivity and exports at an all-time high.

"In the long run I am confident that our economy will continue to grow because the foundation is solid," Bush told about 500 people at the club, a group of top business executives, bankers and economists.

The president's remarks were part of an administration drive to talk up the economy. Bush's visit to the U.S. financial capital also included meetings with the editorial board of The Wall Street Journal and the cable business channel

CNBC.

On the CNBC television channel's "Kudlow & Company," Bush again said believes in a strong dollar but said it was inevitable that "economies go up and down." The dollar dropped to a 12 1/2-year low of 98.90 Japanese yen on Thursday.

LONG-TERM CONFIDENCE

"I'm confident in the long-term strength of the dollar," Bush said in a transcript released by CNBC in advance of the broadcast of the interview.

The trip to New York came amid reports of further slippage in consumer confidence and word that the Federal Reserve and JPMorgan Chase had agreed to provide emergency funding to Bear Stearns because of a credit crunch at the major U.S. investment bank.

Bush said the Fed chairman and Treasury secretary were on top of the fast-moving events and "will take appropriate steps to promote stability in our markets."

With oil prices at record highs, the mortgage market on the verge of meltdown and the specter of recession looming, Bush has been scrambling to halt the slide in the economy, once seen as a relatively safe part of his presidential legacy.

Some economists say the stimulus package he hammered out with Congress in January may buy time but will not be enough to counter the continuing blows to the economy.

Bush said the administration and Congress had acted quickly to provide economic stimulus, including $450 billion in rebates to taxpayers, and he counseled patience.

On CNBC, Bush played down the value of a proposal by Capitol Hill Democrats to have the Federal Housing Administration offer guarantees for mortgages whose value has plummeted, saying stimulus measures should have a chance to work first.

"We ought to make sure that this stimulus package we passed has a chance to work before government overreacts," he said.

SECOND-QUARTER IMPACT

The president said the rebates to taxpayers would be sent in May and would stimulate consumer spending which "experts expect to have an effect in the second quarter and a greater effect in the third quarter."

Bush so far has resisted taking more dramatic steps, despite the risk of a recession taking hold before he leaves office in January 2009.

While saying the mortgage crisis was the root cause of the U.S. economic slowdown, Bush said he disagreed with ideas in Congress to provide $4 billion for state and local governments to buy up foreclosed homes or give bankruptcy judges the power to order changes in mortgage debt.

Bush said that would artificially keep prices high. Instead he favored programs like one at the Federal Housing Administration that has enabled 120,000 credit-worthy families to refinance their homes and obtain more favorable terms.

The president's speech in New York, the hub of U.S. corporate power, appeared largely aimed at calming Americans' fears about the economy, which has supplanted the Iraq war as the public's top concern.

With his approval ratings near the lows of his presidency, he is also mindful that a protracted downturn could hurt his Republican Party's chances of keeping the White House in November's presidential election.

The economy has become a key campaign issue, with the Democrats trying to taint presumptive Republican nominee John McCain with Bush's policies.

Bush has also seemed powerless to temper high oil prices, a major source of U.S. economic distress. His appeals to oil-producing Arab allies for relief on tight supplies have gone unheeded. Oil prices rose to a record $111 a barrel on Thursday.

(Additional reporting by Glenn Somerville)

(Writing by David Alexander; Editing by Bill Trott)