Conferees Reach Accord on Economic Stimulus Package

February 11, 2009 06:00 PM
 

via a special arrangement with Informa Economics, Inc.

Details to be released today

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


House and Senate negotiators reached agreement Wednesday on a $789.5 billion economic recovery package, which Democratic leaders will move to the House and Senate floor for quick consideration -- House Majority Leader Steny Hoyer (D-Md.) said the conference report could be on the floor today or Friday.

The package exceeds the cost of the entire Iraq war since the invasion of 2003.

Details on the package will be released today, but Senate Majority Leader Harry Reid (D-Nev.) said more than one-third of the package ($282 billion) is dedicated to tax cuts. The bill’s total cost comes in at less than both the Senate’s $838 billion version and the House’s $819 billion measure.

Tax breaks were scaled back to reduce the bill’s cost, including an expanded Senate credit for home purchases and tax deductions for buying new cars -- an $11.5 billion break proposed by the Senate is now down to $2 billion, with tighter limits on who qualifies. The proposal would allow buyers a federal income-tax deduction on local taxes on new-car purchases.

First-time home-buyers could qualify for an $8,000 tax credit. The credit is slightly larger than the $7,500 credit in existing law, but it is substantially less than a proposal in the Senate bill that would have boosted the credit to $15,000 and broadened the eligibility. In addition, the compromise bill waives a requirement that the tax credit be repaid. The credit applies only to homes bought between Jan. 1 and Aug. 31 of this year.

Homeowners who install new doors, windows or furnaces to make their home more energy efficient would be able to get as much as $1,500 back through new tax breaks.

President Obama’s signature tax credit for workers also was trimmed, with income eligibility levels retained but the benefit being reduced.

AMT patch. The bill includes a one-year $70 billion “patch” to again prevent the Alternative Minimum Tax (AMT) from hitting more taxpayers.

The measure would provide an additional 20 weeks of unemployment payments and health-care subsidies for people who are out of work. Social Security recipients would receive an additional $250 payment, and the federal government's contribution to the Medicaid program would increase dramatically.

Some education funding that was cut from the Senate bill appears to have been restored.

The conference committee upped spending on infrastructure from $46 billion in the Senate measure to $49.6 billion (for highway, bridge and mass transit construction). They also added money for state stabilization funds. The House had planned on a $79 billion fund, with the Senate at $39 billion; the conference includes $53.6 billion for state stabilization.

Note: the bill includes more than $150 billion in public works projects for transportation, energy and technology.

The package includes a provision requiring materials purchased with funds from the bill to be U.S. made, a development that brought criticism from trading partners around the world.

The language was softened, and now includes a requirement that the provision be implemented consistent with U.S. international trade obligations.

The final deal included a $5.3 billion tax break that allows corporations to speed up deductions for investments in plants and equipment, and another allowing small businesses to deduct business expenditures of up to $250,000 directly from their tax liabilities.

The deal brought opposition from Republicans, who mostly said they had been shut out of the closed-door talks.

On the Democratic side, Sen. Tom Harkin (D-Iowa) was upset about the way he said Democrats gave in to Republican demands on trimming the size of the package, including its school construction spending and aid to states. “I think we . . . gave in too much in order to appease a few people,” he said, referring to Republican Sens. Susan Collins and Olympia Snowe of Maine, and Sen. Arlen Specter of Pennsylvania, the three moderates whose votes will be needed for Senate adoption of a conference report.

President Obama in a statement thanked Democratic and Republican lawmakers for achieving “a hard-fought compromise.”

A White House blog on the subject noted that the bill did not include everything the president wanted, particularly with regard to education funding, and it suggested that the effort to enact a massive stimulus package could already be bearing fruit with recent announcements by some companies that they were planning to hire.

Impacts. The Congressional Budget Office (CBO) said Wednesday that the House and Senate stimulus bills could significantly boost the economy and create millions of jobs in the next few years. Averaging the effects of the two chamber-passed bills, which CBO said were broadly similar, CBO said the stimulus proposal could boost GDP by between 1.4 percent and 3.8 percent for the remainder of calendar year 2009, between 1.1 percent and 3.3 percent by the end 2010, and between 0.4 percent and 1.3 percent by the end of 2011. Most the bill’s spending is expected to occur in the first two years.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


 

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