Paulson admits U.S. economy in sharp decline

WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson on Tuesday described the economy as being in "sharp decline," the closest he has come yet to conceding an election-year recession has set in.

Appearing tired after a weekend of helping to broker a fire sale takeover of Wall Street investment bank Bear Stearns to keep it from outright collapse, Paulson pushed back against efforts to have him admit a recession was under way.

"There's no doubt that the American people know that the economy has turned down sharply. So to me much less important is the label that's placed on it today. Much more important is what we do about it," he told NBC's Today Show.

Paulson also appeared on ABC's "Good Morning America" where he claimed the Bush administration's $152-billion fiscal stimulus program could generate hundreds of thousands of jobs once tax rebate checks begin flowing in May.

"It will start making a difference here in the second and third quarter, maybe adding 500,000 or more jobs," he said without elaborating about the sectors that might create jobs.

Checks of $600 for individuals and $1,200 for couples are to start being issued on May 2.

Treasury officials, in cooperation with the Federal Reserve, worked nonstop last weekend to help engineer the $2-a-share takeover of Bear Stearns by JPMorgan as they sought to restore some stability to shell-shocked financial markets.

Fed policy-makers were meeting on Tuesday amid expectations their next step will be to slash interest rates by a whopping 1 percent to try to give the flagging U.S. economy a lift.

But the turbulence that persists in markets, analysts say, stems substantially from a loss of confidence that has made ordinary investors wary and threatens to become an outright credit crunch as banks and financial institutions become reluctant to make loans or to take risks.