Congress Seeking New Stimulus Package To Jolt Slumping Economy
WASHINGTON — House Democratic and Republican leaders appeared close to agreement with the White House Wednesday night on a significantly reworked package of emergency tax cuts to jolt the economy out of its slump.
At a Wednesday evening meeting, House Speaker Nancy Pelosi made major concessions to drop increases in food stamp and unemployment benefits in exchange for tax rebates of at least $300 for all people earning a paycheck, including low-income earners who make too little to pay income taxes. Families with children would receive an additional $300 per child, while those paying income taxes could receive higher rebates as well, a senior House aide said.
Pelosi, D-Calif., and House Minority Leader John Boehner, R-Ohio, had yet to reach agreement on a package of tax breaks for businesses after estimates showed a tentative agreement could exceed $70 billion, far more than had been expected, the aide and a Democratic lobbyist said.
Pelosi and Boehner appeared optimistic Wednesday night as they left their third extended negotiating session of the day with Treasury Secretary Henry Paulson. A tentatively scheduled Thursday morning negotiating session was called off, her spokesman said, as Pelosi first needed to brief fellow Democrats on the emerging but controversial plan.
"We'll have more to say tomorrow," Boehner said. "We're hopeful."
Democratic aides said greater GOP flexibility over giving income tax relief to poor families with children _ who would not be eligible under President Bush's tax rebate proposal _ had moved the talks forward.
Asked whether agreement was near, Pelosi said, "We're moving toward that, but all the issues are not resolved."
The business tax portion still being negotiated would give businesses incentives to invest in plants and equipment, give small businesses more generous expensing rules and allow businesses suffering losses now to reclaim taxes previously paid. The last item on spreading operating losses was proving to be unexpectedly expensive.
Lawmakers learned during the day that the government's deficit already would swell to $250 billion this year because of falling corporate tax revenues _ then they signaled they were willing to balloon it higher by more than $100 billion with a stimulus package.
As they met behind closed doors, Wall Street defined volatility, dropping again for most of the day before soaring to a big gain just before closing. The Dow Jones industrials ended the day up just under 300 points.
The federal deficit, which has been dropping in recent years, could reach $379 billion for 2008 _ more than twice last year's red ink _ once the costs of the economic rescue measures are factored in, said House Budget Committee Chairman John Spratt Jr., D-S.C.
"We should act, and act now, to strengthen the economy ... mindful, however, of the long-term budget challenges, the structural deficits that we face unless we act and act seriously," Spratt said.
Bush expressed optimism about quick action.
"I'm confident that we can get something done," Bush said in brief comments to reporters. "There's a spirit that says we need to take a fundamentally strong economy and help it."
The economic growth measure would add about $116 billion to the deficit for the budget year ending Oct. 1, according to back-of-the-envelope calculations by Spratt. All sides agree that the stimulus measures should be temporary.
"Whatever we do is going to have a 12-month shelf life," said House Majority Leader Steny Hoyer, D-Md.
Worries about the ailing economy trumped concern over the deficit as top House leaders and Paulson tallied up the cost of various proposals for tax rebates, business tax cuts and benefit increases, including unemployment compensation and food stamps.
Pelosi pressed to make sure tax relief would find its way into the hands of lower-income earners while Boehner pushed to include upper middle-class couples with incomes of up to $130,000 or so, according to congressional aides.
The rebates are the most costly portion of an emerging $145 billion economic stimulus measure.
Bush backs larger rebates of $800-$1,600, but his plan would leave out 30 million working households who earn paychecks but owe no income tax, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center. An additional 19 million households would receive only partial rebates.
Rep. Barney Frank, D-Mass., said negotiators were near an agreement on an overhaul of the Federal Housing Administration that would make it easier for thousands of homeowners with ballooning interest rates to refinance into federally insured loans. The measure might advance separately of the tax relief package, however.
Both sides reached agreement to allow Fannie Mae and Freddie Mac _ government-sponsored companies that are the two biggest U.S. financers and guarantors of home loans _ to buy loans much larger than the current $417,000 limit, aides and lobbyists said. Frank said that lending cap might reach as high as $700,000 in areas with the highest home prices.
Pelosi's decision to drop expanding unemployment and more money for food stamps _ which many lawmakers had assumed would be included in the package _ could prove very controversial with Democratic constituencies such as unions, who were already stung by a decision to deny states more money for their Medicaid programs.
Many Democrats had pressed to extend unemployment benefits for people whose 26 weeks of benefits have run out, but Republicans resisted.
Some lawmakers expressed alarm about the stimulus package more than doubling last year's deficit of $163 billion.
"I am concerned that, in our rush to help, we will talk ourselves into a quick, feel-good hit today that will leave us with a bigger budgetary hangover tomorrow," said Rep. Paul Ryan of Wisconsin, top Republican on the budget panel.
In the Senate, Democratic leader Harry Reid of Nevada and Republican leader Mitch McConnell of Kentucky have agreed to stand back and let the House take the lead in the talks with the administration.
The aim is to have legislation ready for Bush to sign in just a few weeks, lightning speed for tax and spending measures that can take months or even years to win approval.
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ANDREW TAYLOR | January 23, 2008 11:54 PM EST |
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