Initial rescue plan puts $103 billion in our hands

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 capped a series of fast-paced and intense negotiations in which the administration and lawmakers in both parties had to agree to numerous compromises. And still, the deal is not sealed -- the Senate has yet to weigh in and has promised some changes.

Under the plan, nearly everyone who earned a paycheck in 2007 would receive at least $300 from the Internal Revenue Service -- $103 billion in total. Overall, 117 million families would receive rebate checks that could be mailed as soon as late spring.

Economists said the package, meant to forestall or soften a feared economic recession, should provide a significant psychological boost to the economy. But it still might not be enough to prevent a slowdown. "It is a nice shot in the arm," said Peter Morici, a professor at the University of Maryland.

"It reduces the likelihood of a recession," Morici said, but doesn't eliminate it. Overall, the slowdown will be less severe, but that doesn't mean that the economy won't still slow down."

Adding to economic troubles, the money for the economic stimulus plan would be borrowed and will increase the federal deficit. Over 10 years, House officials said, the plan would add $110 billion to the national debt.

Quick timeline is set

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 that Senate Democrats said they could meet even though they have reservations on the plan.

Although the administration and House leaders had to make big concessions, the deal came together because each side could walk away claiming victory.

The White House made clear early on that it would not insist on permanently extending the president's tax cuts from 2001 and 2003, which many Democrats viewed as a potential deal breaker.

And House Speaker Nancy Pelosi, D-Calif., ultimately bowed to Bush's insistence that the package not include extending unemployment benefits or increasing food stamp benefits.

"I can't say that I'm totally pleased with the package, but I do know that it will help stimulate the economy," she 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 rejected in past stimulus plans. "This was not easy," he allowed.

In return, however, the deal includes provisions authored by 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," President Bush said at the White House briefing room.

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 to help homeowners threatened by foreclosure renegotiate their loans without sharp increases in their payments.

The package would temporarily increase the size of jumbo mortgages that can be bought by government-sponsored Fannie Mae and Freddie Mac, from $417,000 to as much as $729,750 in high-cost housing markets.

On the business side, the package gives companies a 50 percent bonus deduction on new equipment that would normally be depreciated over 20 or so years.

The package also doubles 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.

The Senate hurdle

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 pay-outs.

But the deal may be far from final passage: Senate Democrats quickly vowed to add to the House compromise.

Senate Democrats immediately criticized the plan and said they were developing their own package that could include temporarily extending unemployment benefits and increasing food stamp benefits.

Some economists agree with Senate Democrats that increasing the jobless and food stamp benefits would inject money into the economy more quickly than the rebate checks, which would not be sent until May at the earliest.

"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 restored 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 Schumer, D-N.Y. "But now we have to work on the bookends."