U.S. President George Bush called for the immediate implementation of US$145 billion worth of tax rebates for individuals and businesses in order to kick start the country's ailing economy.

While Bush refrained from specific details, he said the package must represent at least one per cent of the country's gross domestic product.

"This growth package must be built on broad-based tax relief that will directly affect economic growth," he said Friday during a press conference, adding that the package should not include any tax increases.

Specifically, Bush said the package should bolster business investment and consumer spending and must include:

• Tax incentives for American businesses, specifically small businesses;
• "Direct and rapid" income tax relief for individuals.

"Americans can use this money as they see fit; to help meet their monthly bills, cover higher costs at the gas pump and pay for other basic necessities," Bush said of the temporary plan.

"I believe there is enough broad consensus that we could come up with a package that can be approved with bi-partisan support," Bush said, adding that passing the growth package was the country's most pressing economic priority.

The rebate plan was backed up Thursday by Federal Reserve Chairman Ben Bernanke who suggested the government needed to put money in the hands of Americans who would spend it quickly.

"Putting money into the hands of households and firms that would spend it in the near term" is a priority, he said, suggesting research shows poor people and the middle class are most likely to spend the rebate soon after receiving it.

But some economists say the Bush plan won't do much to help resolve economic problems over the long term.

"The U.S. economy has been hit right smack across the forehead by the back of a shovel in the form of the sub-prime crisis and the ballooning trade deficit which are destroying demand for U.S.-made goods and services," Peter Morici, a business professor at the University of Maryland, told CTV Newsnet's Mike Duffy Live.

"This is kind of like a big Band-Aid or an Aspirin. It will make the patient feel a little bit better, but it won't solve the problem."

Morici said the U.S. needs to tackle its banking system and large trade deficit, which keeps growing.

"Unless we fix our appetite for oil, our appetite for Chinese goods, we're going to have to keep people borrowing all the time to keep America working. It's a crazy model," he said.

U.S. economy's impact on Canada

Patricia Croft -- chief economist at Phillips, Hager and North -- says the U.S. economy is likely in a recession and that will have a major impact on Canada.

"The myth has been that the U.S. could go into recession and the rest of the world, particularly Canada, could party on." Croft said. "But I don't think that's the case. I think our two economies are inextricably linked and as a result -- with a bit of a lag -- I think Canada is going to feel the pain, as well."

But Croft told Mike Duffy Live that doesn't mean that Canada will necessarily fall into a recession.

"The U.S. is in a housing depression. Our housing prices are just cooling off and the Canadian consumer indeed is in far better shape. But, nonetheless, given the linkages on the trade side, I think at a minimum it means several quarters of sluggish growth for the Canadian economy lie ahead," Croft said.

The impact of a weak U.S. dollar has already had a negative impact on Canada's manufacturing industries -- such as the forestry sector -- which are dependent on exports to the U.S.

"It's been really bad and it's probably going to get worse when your major customer is heading towards a recession," said Avrim Lazar, head of the Forest Products Association of Canada.

"When the prices of your products are going up because the dollar has gone up, of course, you're in trouble. And it's not just forestry, it's all of manufacturing."

Earlier this month, the Harper government announced a $1 billion aid package to help communities and workers affected by a downturn in export-dependent industries. Lazar says Ottawa can help in the long term by making Canadian manufacturers -- specifically the forest industry -- more competitive to meet a growing global need for wood products.

"As we restructure and invest, we know that the market is going to be there. But we need the government to create a business climate that gets us ready. So that means -- not bail outs -- (but a) tax regime that makes us competitive," said Lazar.

Lazar said Ottawa could invest more in research and market development, and it could also make research tax credits refundable.

Meanwhile, Liberal Leader Stephane Dion issued a news release Friday outlining what a Liberal government would do to protect the Canadian economy.

Dion would create a $1 billion "Advanced Manufacturing Prosperity (AMP) Fund to support major investments in manufacturing and R&D facilities to help Canada's manufacturing sector thrive in the global economy," the release stated.

Markets rally, lose momentum

European and Asian markets maintained a steady climb back from Friday's early-morning plunge -- bolstered by news of Bush's growth-package announcement -- while North American markets lost momentum by the late morning.

Toronto's S&P/TSX composite index slid from a triple-digit advance to fall 29.43 points to 12,766.2 after plummeting 279 points Thursday.

Oil, copper, gold and other commodities were again to blame for the down turn. The TSX Venture Exchange dropped 8.94 points to 2,647.8. However, the loonie edged up 0.28 of a cent to 97.39 cents US.

Earlier in the day in London, the FTSE 100 Index rose almost 2 per cent to 6,016.40, led by the Rio Tinto Group mining company whose shares rose by 5.6 per cent.

Other European markets:

• Frankfurt, Germany's blue chip DAX 30 index rose by 0.8 per cent to 7,474.21,
• In Sweden, the Stockholm-based OMX increased 1.3 per cent to 316.97.
• In Paris, the CAC-40 climbed 1.2 per cent to 5,219.22.

Tokyo's Nikkei 225 stock index -- the largest in the region -- rose 0.6 per cent to 13,861.29, which followed a drop of three per cent when the index opened Friday.

The main Hong Kong index also gained, rising 0.4 per cent to 25,210.87 after an initial loss of 3.7 per cent Friday morning.

Asian markets have sagged since the beginning of the year amid worries about the impact of the U.S. economic slowdown. A slump in the U.S. housing market and mounting credit crisis are responsible for much of the problem, which some are calling the first U.S. recession since 2001.