WASHINGTON (Reuters) – President George W. Bush called on Congress on Friday to give the U.S. economy a “shot in the arm” with an election-year package of temporary tax cuts and other measures worth up to $150 billion.

Bush said the United States, where share markets have slumped and unemployment is rising, faced the risk of an economic downturn but that his advisers still expected continued growth, albeit at a slower pace.

He said he wanted Congress to move quickly on a stimulus package that would focus on tax rebates for families and incentives to encourage business investment. The White House said the package could create about 500,000 new jobs.

“This growth package must be built on broad-based tax relief that will directly affect economic growth and not the kind of spending projects that would have little immediate impact on our economy,” Bush said at the White House.

Treasury Secretary Henry Paulson said the administration hoped for a package worth about $140 billion to $150 billion, which is a little more than 1 percent of the economy’s size.

Financial markets are reeling amid bleak reports of declining retail sales and rising unemployment on top of soaring oil prices and a credit crunch brought on by a crisis in subprime mortgages.

Bush’s plan failed to reassure investors on Friday as world stock prices fell again, with U.S. stocks tumbling to close out the worst week for the benchmark S&P 500 index in 5 years on fears the White House effort will not be enough to avoid recession.

Economists are talking of a possible recession taking hold before presidential and congressional elections in November and the debate over an economic stimulus has been taken up by candidates campaigning to succeed Bush in the White House.

Bush and the Democratic-led Congress are in rare agreement that a stimulus is needed. But they are still hammering out the details of a plan that is likely to include tax rebates of several hundred dollars each to help spur consumers as well as temporary tax breaks for businesses.

TAX REBATES

Under discussion are proposals to trim the lowest income tax rate and give the money back in a rebate. Lawmakers are also considering allowing businesses to immediately write off 50 percent of their new investments.

Democrats are looking to provide states with some financial aid, extend unemployment benefits beyond the 26 weeks offered by most states and to get some more money for food stamps.

For now, lawmakers are putting aside the bitter partisanship that dominated last year’s session and which resulted in near-gridlock over spending, taxes, health care and the Iraq war.

“I am encouraged and share the president’s view that we need prompt bipartisan action to strengthen our economy,” said Senate Majority Leader Harry Reid.

Only a day earlier, the Nevada Democrat had expressed some disappointment with the results of a telephone conference between Bush and congressional leaders.

Sen. Charles Schumer, a New York Democrat, said after Bush’s remarks on Friday that the president needed to accept some spending as part of the package.

“We want a balanced package of tax rebates for the middle class and spending stimulus that jump-starts the economy quickly,” Schumer said at a news conference.

Bush predicted that an agreement could be worked out soon. The administration and lawmakers say the outlines of plan could be clear by Bush’s State of the Union address to Congress on January 28.

“I believe we can come together on a growth package very quickly,” Bush told reporters as he visited a lawn mower factory in Maryland on Friday.

Most of the major White House contenders have unveiled proposals for the economy but they differ widely on specifics, highlighting the challenges in getting a bipartisan agreement.

Sen. Hillary Clinton, who has proposed a $110 billion plan that would target poor and middle-class people, said Bush’s approach would shortchange struggling families.

“I don’t think it does enough,” she said in Las Vegas.

Meanwhile, Republican Sen. John McCain, campaigning in South Carolina, expressed wariness about some Democratic ideas for a stimulus, especially those focusing on spending.

“I want to see where that money is going to come from,” said McCain, who laid out a proposal on Thursday for cuts in corporate tax rates and incentives for companies to invest in new equipment and research.

(Reporting by Caren Bohan and Donna Smith, additional reporting by Jeremy Pelofsky, Steve Holland and Jeff Mason; editing by Kristin Roberts and Stuart Grudgings)