High-yield/macroeconomics (fka YIELD)

[Preciouslife1]

Package curbs parties' pet proposals

http://www.usatoday.com/money/economy/2008-01-23-economy-update_N.htm

DEAL DETAILS

Congressional leaders have reached a deal with the White house on a bipartisan economic stimulus package that is expected to move swiftly through Congress and give most tax filers rebates of $600 to $1,200.


WHAT'S IN

-Tax rebates: Checks of at least $300 for almost everyone earning a paycheck, including low-income earners who make too little to pay income taxes, so long as they earned at least $3,000 in 2007. Families with children would receive an additional $300 per child, while those paying income taxes could receive higher rebates.
The full rebate would be limited to people earning below a certain income cap, likely $75,000 for individuals and $150,000 for couples.

-Business tax write-offs: Spurring business investments with so-called bonus depreciation and more generous expensing rules.

-Housing rescue: Raising the limit on Federal Housing Administration loans from $362,000 and caps on loans that Fannie Mae and Freddie Mac can buy from $417,000 to $729,750 in high-cost areas.

WHAT'S OUT

-Permanent tax cuts: Republicans conceded that their top priority would have to be left out.

-Unemployment insurance: Democrats wanted to extend benefits past 26 weeks.

-Food stamps: A boost for benefits.

-Medicaid: Democrats gave up on including Medicaid payments to states.

-Low-income heating subsidies: Democrats are surrendering the fight to include them.

-Infrastructure spending: Spending on transportation or repair projects already underway is off the table.

-Miscellaneous: Republicans' proposal to allow businesses suffering losses now to reclaim taxes previously paid was dropped.

Source: Associated Press


WASHINGTON — The Bush administration and House leaders agreed Thursday on $150 billion in temporary tax breaks for individuals and businesses that they hope will jump-start an ailing economy.
Moving quickly to help avert more stock market losses such as those that unnerved investors last week, Democrats and Republicans scuttled some of their favorite proposals in favor of a pared-down fiscal stimulus package.

President Bush immediately gave the product his blessing. "This package has the right set of policies and is the right size," he said at a White House news briefing. "I urge the House and the Senate to enact this economic growth agreement into law as soon as possible."

The centerpiece of the agreement are tax rebates for anyone who earned at least $3,000 last year. Most individuals will get $600 and most couples $1,200, but the rebates will start at $300 for those who paid no taxes last year.
Eligible families with children will get an additional $300 per child. The rebates will phase out beginning at $75,000 for individuals and $150,000 for families, not counting their contributions to IRAs and 401(k) savings plans.

About two-thirds of the tax relief will go to taxpayers and one-third to businesses in the form of accelerated deductions on equipment. Republicans heralded the business tax breaks as a way to generate jobs.

Many senators who did not take part in the negotiations said they would seek changes when the measure reaches the Senate. Labor unions and liberal groups that had sought spending increases for low-income and unemployed Americans also protested.

"The package is missing the two most effective means of providing an immediate economic boost: a temporary extension of unemployment benefits and a temporary increase in food stamp benefits," said Sen. Joe Lieberman, I-Conn.

The objections — coming after Senate Majority Leader Harry Reid, D-Nev., had pledged to let the House negotiate the package — led administration officials to warn that too many additions could kill the measure. "This thing could easily look like a Christmas tree," Treasury Secretary Henry Paulson said.

House Minority Leader John Boehner, R-Ohio, said he and House Speaker Nancy Pelosi, D-Calif., had to fend off myriad requests for additions. "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. "But if it does not, then there will be more to come."

Boehner described the plan as "simple"; and it will get the money back out into the American economy as quickly as possible."

Many economists agreed. "The agreement is timely, it is temporary, and it is fairly well targeted," said Douglas Elmendorf, senior fellow at the Brookings Institution and a former Federal Reserve economist. "It will still be very likely a weak year for economic growth, but by encouraging spending, both the Fed (interest rate) cuts and fiscal policy will help put people to work and keep incomes going."

The package is likely to fly through the House next week before encountering Senate objections next month. Sen. Max Baucus, D-Mont., said his Finance Committee would recommend changes. Sen. Charles Schumer, D-N.Y., while applauding the plan's "bull's-eye right at the middle class," said that should include extending the time for people to get unemployment benefits. Other proposals include new public works spending and a summer youth jobs program.

Reid said the goal is to get a package to Bush's desk by mid-February. He said the $150 billion price tag "is not a magical figure."


LOOK BACK: History offers lessons for economic stimulus

Even after a package is enacted, it will take the Internal Revenue Service several months to send out rebate checks. Paulson said efforts have been made to speed up the process, but that it would still take about two months to get the first checks in the mail and another 10 weeks to complete the rebates to 117 million taxpayers.

Among the critics of the plan Thursday were leading labor unions. "Congress is considering a Band-Aid, half-hearted solution to the economic crisis," said Gerald McEntee of the American Federation of State, County and Municipal Employees. "Rebate checks alone are not going to address the crisis facing families who rely on unemployment insurance, food stamps and Medicaid programs."