By Peter Baker and Jonathan Weisman
Washington Post Staff Writers
Wednesday, January 23, 2008
President Bush and congressional leaders moved closer to agreeing on a compromise economic rescue package yesterday, fending off fresh protests from both the right and the left as they rushed to respond to a cascading series of economic troubles and to head off a potential recession.
As markets roiled from a sharp sell-off around the world and the Federal Reserve cut interest rates at home, Bush met with House and Senate leaders to work out a package of tax breaks for consumers and businesses. In an important concession to Democrats, Treasury Secretary Henry M. Paulson Jr. signaled that he is open to including breaks even for those who pay little to no income taxes.
Paulson plans to open formal talks on the details of the package this morning, and Senate leaders agreed to defer to House Speaker Nancy Pelosi (D-Calif.) and House Minority Leader John A. Boehner (R-Ohio) as chief negotiators. But officials said they were close to the framework of a roughly $145 billion plan. About two-thirds of the money would go for tax breaks for individuals, plus extended unemployment and food stamp benefits, while the other third would be for business tax breaks. Individuals would get rebates of as much as $800, and married couples as much as $1,600.
"I left the meeting that I just had in the Cabinet Room with the leadership in the House and the Senate with a very positive feeling," Bush said. "All of us understand that we need to work together. All of us understand that we need to do something that will be effective. And all of us understand that now is the time to work together to get a package done."
Pelosi told reporters that she is "confident that we will have a bipartisan agreement," citing turmoil in global markets as an additional reason to act quickly. "Now we see across the world that the state of the economy in the U.S. is having an impact, as well," she said. "So the urgency we feel at home is now even more urgent as we see the impact of our market on others."
Both sides tried to temper expectations about how quickly the plan could pass. With House Republicans leaving for a retreat tomorrow, administration and congressional aides said a deal will probably not happen until next week. Senate Majority Leader Harry M. Reid (D-Nev.) said he hopes it could then be passed by Congress and sent to Bush's desk by the start of the next congressional recess, on Feb. 15.
"We hope we can do it more quickly than that, but our goal is to do it before we break for the Presidents' Day recess," Reid said.
If a package is passed by both chambers and signed by Bush, it would take several weeks to get out tax rebate checks. The administration and the Internal Revenue Service have already begun discussing how to accelerate the disbursement of those checks, but it will depend on how complicated the package is. After Bush signed the last such rebate into law in 2001, it took 6 1/2 weeks for the first checks to be mailed.
After a year of antagonism over issues including the Iraq war and children's health care, the collaboration between Bush and the two Democratic leaders was intended to signal to a nervous country that Washington can put aside partisan bickering to bolster the economy. The rapid pace of ominous bad economic news has persuaded incumbents of both parties to seek quick action, either out of conviction that it could stave off a recession or out of a desire to at least look as if they are acting.
The harmony among Bush and the leaders was so striking that Boehner, who has spent much of the last year complaining about Pelosi, said the two are essentially on the same page. Asked by reporters outside the White House what the issues of disagreement are, Boehner said, "There are no issues of disagreement right now."
But the volume of dissent from conservatives and liberals grew louder yesterday. They agreed that bad policy is being railroaded into law for political reasons, even if they disagreed on what makes it bad.
Conservatives scorned one-time tax rebates to individuals as ineffective pandering and called for permanent breaks aimed at stoking investment. Liberals said Bush's proposed package already tilts toward the wealthy and pushed instead for a broad investment in public works.
"We've tried tax rebates before, but they haven't worked as well as they should because previous rebates left out those at the very bottom of the economic ladder -- the families struggling every day to pay their bills, heat their homes and pay their mortgages," Sen. Edward M. Kennedy (D-Mass.) said on the Senate floor. "Now the president wants to do the same thing again. He's proposed a tax break in his stimulus package that would completely leave out the poorest Americans."
Sen. Judd Gregg (R-N.H.) waved what he called "a red flag of reason," mocking the White House and both parties' congressional leaders for "chomping at the bit" to pass a stimulus plan for what he said would be merely political appearances. Gregg said he is particularly disappointed that Bush did not start on the conservative end, but rather "in the middle," while Democratic leaders offered liberal spending plans. "This thing is not moving in a fiscally responsible direction," he said, "but it's moving -- big-time."
The administration tried to deal with the complaint raised by Kennedy and other Democrats that the principles for stimulus that Bush laid out Friday would leave out 50 million Americans who work, or who live on fixed incomes, but take in too little to pay income taxes. Paulson said Friday that Bush wants "broad-based tax relief for those who are paying taxes."
But Paulson reversed that formulation yesterday, saying in a speech to the U.S. Chamber of Commerce that "the package must reach a large number of citizens." By saying "citizens" instead of "taxpayers," the secretary opened the door to ideas advanced by Democrats to extend the short-term tax relief to those who pay little to no income taxes. Among ideas under consideration, officials said, would be sending checks to the lowest-income workers, increasing the earned-income tax credit that goes to low-income workers, and increasing the child tax credit.
Administration officials said privately that, despite philosophical concerns, they would be open as well to extending unemployment benefits and food stamps, as Democrats want to do. "If the pots don't become a large pot, I think a deal can be done," said one administration official, speaking on the condition of anonymity to discuss negotiating strategy.
But Bush aides warned that they would not accept the large public works projects that some liberal lawmakers and union leaders are demanding.
Pelosi originally wanted to address infrastructure spending in a separate, follow-on measure to avoid complicating a bipartisan stimulus package, but Reid has pushed her to fight for at least some such projects because he argued that two bills would be difficult to pass in the narrowly divided Senate, congressional aides said.
Many economists, including Congressional Budget Office Director Peter R. Orszag, have suggested that such spending would have little impact because it takes too long to allocate funds, solicit bids for construction contracts and begin the work. Democrats are coalescing around a modest pot of money for highway-resurfacing projects only, which they say are needed, are labor-intensive and are quicker to get started.
For their part, aides said, Democrats will probably agree to the depreciation tax breaks Bush wants for business, despite complaints from some in the party. Under the plan being discussed, small businesses would be allowed to deduct from their taxes twice as much of their investments in new equipment -- $250,000 instead of $125,000 -- and all businesses could write off investments more quickly.
Staff writers Paul Kane and Jeffrey H. Birnbaum contributed to this report.