Senate under pressure to approve stimulus deal to get tax rebates to workers in May
Few public developments were expected Friday as lawmakers digest Thursday’s announcement of a hard-won agreement between House Speaker Nancy Pelosi, Republican leader John Boehner and Treasury Secretary Henry Paulson that would pump about $150 billion into the economy this year and perhaps stave off the first recession since 2001.
The Senate very often wins its battles with the House. But now, with the power of the Bush administration behind them, House leaders are optimistic that their simply drawn measure – providing rebate checks to 117 million families and $50 billion in incentives for businesses to invest in new plants and equipment – would prevent the Senate from making significant changes such as extending unemployment benefits.
Under the agreement announced by the White House, Boehner and Pelosi, individual taxpayers would get up to $600 in rebates, working couples $1,200 and those with children an additional $300 per child. In a key concession to Democrats, 35 million families who make at least $3,000 but don’t pay taxes would get $300 rebates.
The rebates would phase out gradually for individuals whose adjusted gross income exceeds $75,000 and for couples with incomes above $150,000. Contributions to IRA and 401(k) retirement accounts and health savings accounts would not count toward the income limit.
“This package will lead to higher consumer spending and increased business investment,” Bush said in hailing the agreement.
The bill will go straight to the House floor next week and on to the Senate, where Democrats such as Edward Kennedy of Massachusetts promise to try to add elements such as extending unemployment benefits for workers whose benefits have run out, boost home heating subsidies and raise food stamp benefits.
Kennedy said he wants “to strengthen this package to provide unemployment insurance to workers looking for jobs and to help families coping with high heating costs and skyrocketing food prices.”
Such ideas may be popular in the Senate, but the Bush administration has signaled it’s unlikely to welcome efforts to broaden the measure, and pressure was mounting in the Senate to accept the deal.
“The American people are not going to have a lot of patience for taking time,” Paulson said.
Still, many Democrats, including House Ways and Means Committee Chairman Charles Rangel, D-N.Y, were deeply unhappy that Pelosi agreed to jettison those proposals during the talks.
“I do not understand, and cannot accept, the resistance of President Bush and Republican leaders to including an extension of unemployment benefits for those who are without work through no fault of their own,” Rangel said.
If the Senate gives quick approval, the first rebate payments could begin going out in May and most people could have them by July.
It has become increasingly clear that the economy is teetering on the edge of recession, if it hasn’t already gone over that line. The crisis in subprime home loans has hit hard at many lending institutions, cramping credit for almost everyone else. Economic growth has all but disappeared, companies are reporting big losses and Wall Street had been tumbling day after day – even after emergency Federal Reserve rate-cutting – until Wednesday’s hopeful talk about the stimulus deal. The Dow Jones industrial average was up more than 100 points Thursday after soaring nearly 300 the day before.
For businesses, the stimulus measure would allow them immediate tax write-offs for 50 percent of the purchase price of plants and other capital equipment and permit small businesses to write off additional purchases of equipment. A provision to allow businesses suffering losses now to reclaim taxes previously paid was dropped in end-stage talks.
Senate Majority Leader Harry Reid, D-Nev., said the goal was to send the package to the White House by Feb. 15 for Bush’s signature. He noted, however, that the Senate was likely to try to add more spending for the unemployed, food stamp recipients and states suffering budget crunches.
Bush had supported larger rebates of $800-$1,600, but his plan would have left out 30 million working households of people who earn paychecks but don’t make enough to pay income tax, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center.
To address the mortgage crisis, the package raises the limit on Federal Housing Administration loans from $362,790 to as high as $729,750 in expensive areas, allowing more subprime mortgage holders to refinance into federally insured loans. To widen the availability of mortgages across the country, it also provides a one-year boost to the cap on loans that Fannie Mae and Freddie Mac can buy, from $417,000 up to $729,750 in high-cost markets.