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Bush: Rising energy, medical costs are cause for concern
CRAWFORD, Texas -- President Bush voiced concern over soaring energy and health-care costs on Tuesday, while the Federal Reserve raised short-term interest rates to the highest level in nearly four years to guard against inflation.
It was the Fed's 10th interest rate increase in 14 months to tighten credit and pushed the federal funds rate by one-quarter percentage point to 3.50 percent.
Commercial banks responded by increasing their prime lending rates, the base for many consumer loans, to 6.50 percent.
Bush said rising interest rates were not his chief economic worry.
"I think we're more concerned about energy prices and health-care prices," said the president, who was meeting at his ranch with economic advisers. Those two areas will have a greater effect on the economy's future health, he said.
Polls show a majority of Americans disapprove of Bush's handling of the economy. A recent Associated Press-Ipsos poll found Bush's economic approval rating at just 41 percent, the lowest level since the survey was started in December 2003.
Bush readily acknowledged that Americans' pocketbooks are taking a hit from rising costs for health care and for gasoline.
The Energy Department reported Monday that the average U.S. retail price of gasoline rose to a new high last week of $2.37 a gallon, and it is heading higher. Oil prices also jumped to a new high above $64 a barrel Tuesday before easing off.
"None of us are comfortable paying $2.50 per gallon when we go to fill up our cars with gas," said Allan Hubbard, director of the National Economic Council.
In Texas, Ben Bernanke, chairman of the President's Council of Economic Advisers, told reporters camped out at a nearby school gymnasium after the meeting that the economy has been resilient enough not to be slowed by energy costs so far. He said rising health-care costs have been more of a problem.
"It's certainly a major drag on the economy, on family budgets," he said.
Bernanke said health care costs have risen more than 30 percent since Bush has been in office. He said the average family spends about $600 beyond insurance costs for health care.
Still, Hubbard said most Americans are happy with their personal finances and he thinks war and terrorism also are contributing to the president's low approval ratings.
"We are a nation at war," Hubbard said. "Obviously, that causes a lot of unease."
Bush rattled off employment statistics to support his view that the economy is thriving -- 200,000 jobs added in July, nearly 4 million since May 2003 and an unemployment rate at 5 percent.
He tried to reassure Americans that he is working to address problem areas. He said although the energy bill that he signed into law Monday in New Mexico won't lower gas prices soon, it is "an important start" to address tight supply and demand for oil.
The president also urged Congress to pass his health care plan. It includes accounts that would allow Americans to pay for some medical care tax-free, subsidies for insurance costs, plans that would allow small businesses to pool their insurance costs, support for new medical technology to reduce errors and limits on lawsuits against doctors and hospitals that he said drive up the cost of medicine.
Bush's opponents say his plan does not do anything drastic enough to have a significant impact on health care prices. Hubbard and Bernanke would not say if other options to lower health care costs were discussed in the meeting.
"These are issues that we are going to have to address, because they are significant," Bernanke said.
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