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 Business News | January 2008 
Tentative Deal on US Economic Stimulus Plan
 David M. Herszenhorn - The New York Times
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| | Investors on the floor of the Sao Paulo Stock Exchange and elsewhere reacted with what many analysts described as panic to the multiplying signs of weakness in the American economy. The US Federal Reserve reacted by making the biggest one-day reduction of interest rates on record. (Sebastiao Moreira/European Pressphoto Agency)
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Washington - House leaders and the White House on Thursday reached a tentative agreement on an economic stimulus package of roughly $150 billion that would pay stipends of $300 to $1,200 per family and provide tax incentives for businesses to encourage spending.
A House aide close to the negotiations said that Speaker Nancy Pelosi of California and the Republican leader, Representative John A. Boehner of Ohio, reached an "agreement in principle" after Ms. Pelosi agreed not to include two proposals that had broad support among Congressional Democrats: an extension of unemployment benefits and a temporary increase in food stamps.
In exchange for those concessions, the Bush administration and House Republicans agreed that the stipend of at least $300 would be paid to all workers receiving a paycheck, even those who did not earn enough to pay taxes last year.
"The vast majority of low-income people are going to get a minimum of $300," said a White House official familiar with the outlines of the accord.
Workers who paid income taxes could receive more than $300, and families with children would receive an additional $300 per child. The stipend, which some lawmakers were calling a "tax rebate," would be subject to income limits so that the wealthiest taxpayers would not receive it. The White House official familiar with the outlines of the accord said that payments would go to individuals earning up to $75,000 and couples earning up to $150,000.
Senators Harry Reid of Nevada, the Democratic majority leader, and Mitch McConnell of Kentucky, the Republican minority leader, have yet to give their approval to the accord. But, while there may be some wrinkles to iron out between the House and Senate, there was nothing to suggest any disagreement so severe as to be a potential deal-breaker.
Republicans immediately cheered the deal as "tilted toward taxpayers" and avoiding "extraneous spending" on unemployment benefits, food stamps, or infrastructure projects, which some Democrats had said should be included in a stimulus package.
But it was unclear how the package, without extended unemployment benefits or increased food stamps, would be received by Democrats in the Senate, including Senator Edward M. Kennedy of Massachusetts and Senator Charles E. Schumer of New York, who have said that those proposals offered the best prospects for quickly injecting added spending into the economy.
Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee, reiterated his interest in extending unemployment benefits at a hearing on Thursday morning, where he said his committee would mark up a fiscal stimulus bill next week.
"There are reports that a deal may be close on the House side," Mr. Baucus said. "The Senate will want to speak, as well."
That announcement of potential action by the Finance Committee could jar Democratic leaders who have been striving for a carefully coordinated effort on the economy. Earlier this week, Mr. Reid announced that the House would take the lead in developing the stimulus package and would conduct the immediate negotiations with the White House and Congressional Republicans.
Noting that tax rebates were one potentially cost-effective method to spur new spending, Mr. Baucus said: "Another example would be expanding unemployment insurance benefits. In recent recessions, Congress has extended the number of weeks that unemployed workers could receive benefits. We could do that again. We could provide a further extension for recipients in high-unemployment states. And we could also temporarily increase the dollar amount of benefits to help unemployed workers to pay their bills."
"Unfortunately, under current law, fewer than four in 10 unemployed workers receive unemployment insurance benefits," Mr. Baucus continued. "To address this problem, we could extend eligibility. For example, we could extend benefits to part-time workers."
Mr. Schumer, at the same hearing, also lamented Ms. Pelosi's concession on unemployment benefits, but said he hoped that cooperation on a quick stimulus plan would continue. "While I may not agree with every element of the package - such as the decision to leave out extended unemployment benefits, which economists say would give us the greatest bang for the buck - there are some very positive developments around the tax rebate for families," he said. "I encourage everyone to keep working in a bipartisan way."
Ms. Pelosi met three times Wednesday with Treasury Secretary Henry M. Paulson Jr. and Mr. Boehner, who have served as chief architects of the plan in a rare show of bipartisanship.
Ms. Pelosi declined immediate comment Thursday morning, but told reporters she would have something to say later in the day.
On her way into a Wednesday evening meeting, Ms. Pelosi signaled that a deal might be close when she said there had been "tremendous" progress during the day.
"I'm hopeful," she said. "We're still working through."
Mr. Bush, after meeting on Wednesday with mayors from across the country, said he was optimistic about reaching swift agreement on a stimulus plan.
"I talked to them about my desire to work with the Congress to get a stimulus package passed, one that's going to be robust enough to affect the economy, simple enough for people to understand it and efficient enough to have an impact," Mr. Bush said. "And I'm confident that we can get something done."
Democratic leaders said that to speed the economic rescue package they would mostly bypass the usual committee process. Lawmakers said that they hoped the plan could be approved by mid-February and that it would be sufficient to soften an economic downturn and forestall a recession.
"One of the principal tenets of the administration and of ourselves is we have got to do this fast," Representative Steny H. Hoyer of Maryland, the majority leader, said Wednesday. "To go through the regular process and have hearings and have mark-ups and subcommittee mark-ups, obviously we would be to some degree twiddling our thumbs while the economy burns."
While Mr. Paulson, Ms. Pelosi and Mr. Boehner were the chief negotiators, other lawmakers have sought to take a strong hand in the process.
Representative Charles B. Rangel of New York, the chairman of the Ways and Means Committee, was said to be lobbying intensively for any payment to be sent to all low-income Americans, including those who did not pay any taxes last year. Some Republicans say benefits should be only for taxpayers.
In a statement Mr. Rangel said, "We must follow the guidance of so many economists who have said, with great clarity, that this package must put money back into the hands of the middle- and lower-income families who will then spend it directly into our economy."
Democrats said the stimulus plan would also include benefits favored by many Republicans, including a depreciation incentive to encourage businesses to make capital investments this year. The plan may also allow businesses to spread operating losses incurred this year back over five years instead of the two years permitted under current law.
Representative Barney Frank, Democrat of Massachusetts and the chairman of the Financial Services Committee, said the worldwide stock market declines this week and the move by the Federal Reserve to lower interest rates by three-quarters of a percentage point had made it clear that there should be no delay.
"The trigger has already been pulled," Mr. Frank said in an interview.
While the Ways and Means Committee has focused on the tax rebate and figuring out the quickest way to deliver the money, Mr. Frank and his committee have been developing a plan intended to avoid a huge increase in home foreclosures. The progress on the stimulus plan came as the Congressional Budget Office revised its economic projections to give a gloomier assessment of the economy, including a widening budget deficit and the first decline in corporate tax revenue since 2003.
The grimmer outlook prompted Senator Kent Conrad of North Dakota, chairman of the Budget Committee, to declare that a short-term stimulus package was insufficient.
"In addition to developing a bipartisan stimulus package," Mr. Conrad said, "we also must work together to tackle the long-term fiscal challenges we face with the coming retirement of the baby boom generation. The American people rightly expect that we will come together to address these two significant challenges."
House conservatives raised alarms about the emerging economic legislation, saying they feared it would focus too much on tax rebates and not enough on tax incentives to encourage businesses to create jobs.
They said any package should include provisions that would reduce the corporate tax rate, adjust capital gains for inflation and lower the capital gains rate for corporations.
"Giving temporary tax rebate checks to families, as important as that is, is not the same as economic growth," said Representative Jeb Hensarling of Texas, chairman of the Republican Study Committee. "If you're going to have an economic stimulus package, it ought to contain some economic stimulus."
Steven Lee Myers contributed reporting. |
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