Bipartisan Deal Cut on Economic Stimulus Package

The Democratic-controlled Congress and the Republican-occupied White House have agreed in principle on a $150 billion economic stimulus package. Like most bipartisan efforts, both sides had to give a little to get something done. Now, the question is whether too much was surrendered politically in exchange for a package that won't take effect economically for five months.

The details aren’t likely to be announced until President Bush has his State of the Union speech next week. What appears to be the outline, though, has leaked out. Essentially, taxpayers will get $600 each, or $1,200 for a couple filing jointly, plus maybe some extra for families with kids. The cap on this appears to be $75,000 for an individual and $150,000 for a couple. People who made at least $3,000 but who didn’t pay taxes are eligible for a $300 check. Businesses will be allowed to depreciate equipment faster. To address the mortgage problem, Fannie Mae and Freddie Mac would be able to purchase loans up to $725,000 in high-cost areas, a boost of close to $300,000.

However, the Democrats gave up an extension of unemployment benefits and more help in the food stamp program. The Republicans surrendered a provision that would allow business that are losing money to claim back taxes that they had already paid. The White House had to accept smaller checks to everyone to cover those non-taxpayers (and there are 30 million working households in that category) who will now get paid despite having no tax liability.

The hard part comes when the Democrats in Congress have to decide if getting a deal done now is worth giving up on the unemployment and food stamp extensions. For the GOP, they have to decide if the $150 billion price tag for this arrangement is too much (especially the money to non-taxpayers)1:23 PM 1/24/2008 in light of the deficit they have run up. The odds are that in an election year, this will sail through quickly just because any delay will look bad.

Of course, there is quickly and there is what Washington means by quickly. If there are no snags, estimates are that the rebates will hit mailboxes in June. If the idea is for people to spend now on credit and pay off purchases with money in five months from now, this might help, but Americans are short on credit at the moment. As it is, this looks like an election year effort to take credit for a late year business improvement that is going to happen anyway.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

Kensington Review Home