Bush, House Hammer Out $150 Billion Stimulus Bill
Tax Breaks a Central Element In Bipartisan Compromise
Friday, January 25, 2008; Page A01
House leaders and the Bush administration reached agreement yesterday 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 arduous, 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 for now but concluding that the issue could be revisited if the economy continues to slide.
"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 A. 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 past stimulus plans.
"This was not easy," he allowed.
In return, however, the deal includes provisions from Boehner that would allow 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 in the White House briefing room. In particular, he expressed satisfaction that it was built entirely on tax breaks.
Whether the measure actually will stabilize a jittery economy was the subject of debate, however. Bernard Baumohl, managing director of the Economic Outlook Group, said the package -- and the emergence of brief bipartisan comity after so many months of partisan infighting -- would have a positive psychological impact on markets and investors.
But he cautioned: "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 receive rebates of $600 each, or $1,200 per couple. Families with children would receive an additional payment of $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 that limited checks to income tax payers. Rebates would be limited, however, to single taxpayers with adjusted gross income up to $75,000 -- up to $150,000 for couples. Above that, the benefit would phase out until hitting zero for individuals with adjusted income of about $87,000, $174,000 for couples.
The money would be borrowed and would increase the federal deficit.