WASHINGTON – House leaders and the Bush administration reached agreement Thursday on a $150 billion economic stimulus package that would quickly send hundreds of dollars to poor and middle-class workers while offering businesses one-time incentives to invest in new equipment.
The deal, announced by House leaders and President Bush after late-night negotiations, was a work of difficult compromise, and the fight will continue in the Senate. House Speaker Nancy Pelosi, D-Calif., acceded to Republican demands, jettisoning plans to extend unemployment benefits and food stamps, but concluded that the issue could be revisited.
“I can’t say that I’m totally pleased with the package, but I do know that it will help stimulate the economy,” Pelosi said. “And if it does not, then there will be more to come.”
House Minority Leader John Boehner, R-Ohio, agreed to offer $28 billion in cash payments to 35 million working families that earn too little to pay income tax, an idea that GOP leaders had roundly rejected in the past. “This was not easy,” he said.
In return, however, the deal includes provisions authored by Boehner for faster tax write-offs for corporate investment and immediate tax deductions for small-business investment in plants and equipment.
“This package has the right set of policies and is the right size,” Bush said at the White House briefing room. In particular, he expressed satisfaction that it was built entirely on tax breaks.
Whether the measure will stabilize a jittery economy, however, was the subject of debate. Bernard Baumohl, managing director of the Economic Outlook Group, said the package – and the emergence of brief bipartisan comity after months of partisan infighting – would have a positive psychological impact on markets and investors.
But he cautioned that, “practically speaking, this plan is not expected to have any meaningful impact on the economy until much later this year, perhaps in the fourth quarter. Even then, it’s unlikely we’ll see more than an extra blip in GDP growth.”
Under the deal, nearly everyone who earned a paycheck in 2007 would receive at least $300 from the Internal Revenue Service – $103 billion in total. Most people would get $600 each, or $1,200 per couple. Families would receive an additional $300 per child. Workers who earned at least $3,000 last year – but not enough to pay income taxes – would be eligible for $300.
Overall, 117 million families would receive rebate checks, including 35 million with earnings too low to have qualified under an earlier Bush proposal. Rebates would be limited, however, to single taxpayers who earned up to $75,000 or couples with incomes of as much as $150,000. Above that, the benefit would phase out until it is disappears for individuals with adjusted gross incomes of roughly $87,000 and couples who earned $174,000.
The money would be borrowed and will increase the federal deficit.
To address the underlying economic issue of the housing slump, the deal would expand the Federal Housing Administration’s ability to insure higher-priced mortgages and help homeowners threatened by foreclosure renegotiate their loans without sharp increases in payments.
Treasury Secretary Henry Paulson said the first checks and electronic payments could begin flowing “within roughly 60 days” of Bush signing the package into law, with most of the payments in workers’ pockets within 10 weeks of the first payouts. Even the accelerated timetable he outlined would not put money in taxpayers’ hands until May.
But Paulson conceded the deal may be far from final. Pelosi dropped some key demands in order to keep it tilted toward the middle class and include the working poor. In addition to the unemployment and food stamp benefit extensions, she set aside proposed funding increases for low-income heating assistance and aid to state and local governments in the form of Medicaid assistance or infrastructure spending.
Those concessions prompted loud protests, especially from House Ways and Means Committee Chairman Charles Rangel, D-N.Y., who argued with Pelosi deep into Wednesday night. Senate Democrats quickly vowed to add to the House compromise.
“The Senate will want to speak as well,” Senate Finance Committee Chairman Max Baucus, D-Mont., said Thursday morning as he announced that his committee would draft its own stimulus bill next week.
Baucus said he would like to increase the size of tax payments for the working poor and restore unemployment benefit extensions dropped by Pelosi and Boehner. Sen. Ron Wyden, D-Ore., promised to secure funds for infrastructure projects. Sen. Patty Murray, D-Wash., said she will push funding for youth summer job programs. Sen. Patrick Leahy, D-Vt., demanded food stamp funds.
The House package “is aimed as it should be, a bull’s-eye right on the middle class,” said Sen. Charles E. Schumer, D-N.Y. “But now we have to work on the bookends.”