The New York Times-20080125-Bush and House in Accord For --36-150 Billion Stimulus
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Bush and House in Accord For $150 Billion Stimulus
Hoping to give a quick adrenaline shot to the ailing economy, President Bush and House leaders struck a deal on Thursday for a $150 billion fiscal stimulus package, including rebates for most tax filers of up to $600 for individuals, $1,200 for couples and, for families, an additional $300 a child.
The deal capped a series of fast-paced and intense negotiations in which the Bush administration and lawmakers in both parties had to agree to numerous compromises after more than a year of acid relations between Congressional Democrats and the White House.
In praising the deal, Mr. Bush said it had resulted from the kind of cooperation that some predicted was not possible here in Washington.
The House is expected to approve the package on Feb. 6, and the leaders in both chambers have set a goal of Feb. 15 to send a measure for the president's signature, a deadline Senate Democrats said they could meet even though they had reservations about the plan.
Although the two sides made big concessions, the deal came together because each side could walk away claiming victory.
The White House made clear early that it would not insist on permanently extending the president's tax cuts from 2001 and 2003. Many Democrats had seen such a demand as a potential deal breaker.
And Speaker Nancy Pelosi ultimately bowed to Mr. Bush's insistence that the package not include extending unemployment benefits or increasing food stamps.
And by the time Ms. Pelosi, Treasury Secretary Henry M. Paulson Jr. and the House Republican leader, Representative John A. Boehner of Ohio, formally announced the deal at a brief news conference at the Capitol, the two sides were crowing that they had achieved something remarkable, even as some economists questioned whether the package could be adopted and put into effect quickly enough to have a real effect.
Republicans expressed satisfaction that they had forced House Democrats to show fiscal restraint, by agreeing to a plan focused mostly on tax cuts.
I have always believed that allowing people to keep more of their own money and use it as they see fit is the best way to help our economy grow, Mr. Bush said. I'm also pleased that this agreement does not include any tax increases, as well as unnecessary spending projects.
House Democrats , in turn, said they were pleased that they had persuaded the White House to endorse a package primarily benefiting middle- and working-class Americans by setting income caps on the full rebates at $75,000 for individuals and $150,000 for joint filers.
Democrats said that would be the reverse of Mr. Bush's earlier tax policies, which primarily benefited wealthier filers.
It's the mirror opposite, said Representative Rahm Emanuel of Illinois, the Democratic conference chairman. This is middle class and progressive.
Senate Democrats, however, immediately criticized the plan, which also provides tax breaks for businesses, and said they were developing their own package that could temporarily extend unemployment benefits and increase food stamps.
Some economists agree with Senate Democrats that increasing the benefits and food stamps would inject money into the economy faster than the rebate checks, which would not be sent until May at the earliest.
House Democrats countered that their package would send more money to low-income workers than an increase in food stamps, and they pointed to a projection that 35 million families would receive one-time payments of $300, even though they did not earn enough money to pay income taxes. Under the deal, tax filers who earned at least $3,000 last year, but paid less than $300 in income tax, would receive the $300.
The majority leader, Senator Harry Reid of Nevada, who had said the House should lead in negotiating the package with the White House, was one of several Democrats calling the House plan a first step, but saying the Senate expected to shape the final result.
The secretary of the Treasury has understood, the president has understood, the speaker has understood that when it comes over here, we are going to take another look at it, Mr. Reid said.
Among the components the Senate might seek to add, he said, was a summer jobs program for young people at a cost of $500 million to $1 billion. Some Democrats said they would push for more public works spending, which is often given low marks as a tool because projects take too long to start.
Senator Ron Wyden, Democrat of Oregon, said road resurfacing in particular could be done fast. I am absolutely convinced that there are infrastructure projects that can get off the ground weeks and weeks earlier than the rebate checks end up in people's hands, Mr. Wyden said.
Mr. Paulson, standing with the president, acknowledged hurdles remained on Capitol Hill. The work is far from over, he said.
The plan's cost will add to a 2008 budget deficit projected at $219 billion. Over 10 years, House officials said, the plan would add $110 billion to the national debt.
If enacted, the rebates and stipends in the House package, totaling $103 billion, are expected to reach 117 million taxpayers. Payments will be processed automatically for all tax filers.
Full rebates of up to $600 or $1,200 would be paid to individuals earning up to $75,000 adjusted gross income or couples filing jointly and earning up to $150,000. Above that, rebates would be reduced by 5 percent for each $1,000 in income. Rebates would be reduced by $50 for each $1,000 in income, meaning a couple with no children earning $174,000 would have no rebate. A single mother of two children earning $50,000 and paying at least $600 in taxes would receive $1,200 --a $600 individual rebate and $300 a child. A married couple with three children earning $100,000 and paying at least $1,200 in taxes would receive $2,100 -- a $1,200 rebate and $300 a child.
On the business side, companies would be given a 50 percent bonus deduction on new equipment that would normally be depreciated over many years. The incentive, which would cost $42.3 billion in 2008, is intended to encourage spending. The package would also double the limit on expenses, to $250,000 from $125,000, that small business can write off as a deduction from annual income, with a total cap of $800,000. That is expected to cost $1 billion in 2008.
In a nod to the mortgage market problems, the plan would allow Fannie Mae and Freddie Mac, the government-sponsored mortgage-finance companies, to buy loans up to $625,500, from the current $417,000 limit. The Federal Housing Administration would be able to insure home loans of up to $725,000, from the current $362,000 ceiling.
The one-year increases would make it easier to obtain new mortgages or refinance loans in expensive markets.
In a major concession, the White House agreed to increase the conforming loan limits and stopped insisting on wider reform of the mortgage finance companies. Mr. Paulson, at a news conference, acknowledged that he was not happy about that.
I got run down by a bipartisan steamroller, he said. Republicans and Democrats reunited on this.
The cooperation was accelerated by worsening economic news. Mr. Bush had initially intended to wait until his State of the Union speech on Jan. 28 to decide whether a stimulus was needed, but gloomier economic indicators forced him to speed those plans.
He moved swiftly after returning from the Middle East to speak to Congressional leaders and start negotiations. Finally, the declines in global stock markets on Monday and the emergency rate cut by the Federal Reserve on Tuesday pushed the House leaders and the Treasury secretary into high gear.
The House took the lead in part to avoid entangling the stimulus negotiations in presidential politics -- two leading Democratic candidates and a leading Republican one are senators -- and in part because the Democratic majority is wider and the caucus easier to unify in the House than in the Senate.
The final meeting among Ms. Pelosi, Mr. Paulson and Mr. Boehner was a Wednesday evening session that lasted from just after 7 until about 8:30.
Ms. Pelosi returned to her office where she met late into the night with Representative Charles B. Rangel of New York, chairman of the Ways and Means Committee. Mr. Rangel had lobbied strenuously to include payments for the poorest wage earners, even if they do not have to pay income taxes, and to extend unemployment benefits.
The deal was sealed in phone calls on Thursday morning, less than a week after Mr. Bush had a conference call with Congressional leaders.
Senator Max Baucus, Democrat of Montana and chairman of the Senate Finance Committee, said his panel would mark up its package on Tuesday.
At a Senate hearing on Thursday, Peter R. Orszag, director of the Congressional Budget Office, testified that increases in food stamps and unemployment benefits would have more immediate economic effects than rebates.
Food stamp and unemployment benefits can affect spending in two months, Mr. Orszag said. Rebates would affect spending at the end of 2008.
[Illustration]PHOTOS: Mr. Paulson joined President Bush for a statement on the proposal. Mr. Bush praised House Democrats' cooperation. (PHOTOGRAPH BY JAMIE ROSE FOR THE NEW YORK TIMES) (pg. A20); Treasury Secretary Henry M. Paulson Jr., leaning, and Representative John A. Boehner with Speaker Nancy Pelosi yesterday. (PHOTOGRAPH BY BRENDAN SMIALOWSKI FOR THE NEW YORK TIMES) (pg. A20)