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Politics

Government: Go shopping

The president, leaders of both parties push for tax rebates to jump-start the economy

WASHINGTON - You could find hundreds of extra dollars in your pocket this year, and the government is hoping you'll go right out and spend it.

Tax rebates are emerging as a key element of a plan to stave off recession, endorsed by President Bush, congressional leaders and Federal Reserve Chairman Ben Bernanke on Thursday.

The idea is that if people spend more it will pump up the economy, which has been showing dire signs of falling into the first national recession since 2001. Democratic and Republican leaders in the House are considering rebates in the range of $300 to $800 a person.

All the talk of rescue efforts failed to soothe Wall Street. The Dow Jones Industrial Average plunged 306.95 points Thursday, underscoring deepening concern about the country's economic health.

The sudden scramble to take action comes as fears are mounting that a severe housing slump and a painful credit crisis could cause people to clamp down on their spending and businesses to put a lid on hiring.

Bush told congressional leaders privately that he favors income tax rebates for people and tax breaks for businesses, officials said. He spoke with congressional leaders as House aides worked behind the scenes on an emergency plan that could also include more money for food stamp recipients and the unemployed.

Aides to lawmakers involved in the talks said the White House is pressing for tax rebates of $800 for individuals and $1,600 for married couples. Lawmakers were likely to settle on a $500 rebate for individuals, said an aide involved in the talks, with details for couples and people with children still being negotiated.

The rebates likely would be limited to individuals with incomes of $85,000 or less and couples with incomes of $110,000 or less, the aide said, speaking on condition of anonymity because no final decisions had been made.

The president did not push for a permanent extension of his 2001 and 2003 tax cuts, many of which are due to expire in 2010, one official said. That would eliminate a potential stumbling block to swift action by Congress, since most Democrats oppose making the tax cuts permanent.

Bush planned to lay out his position today, but he wasn't expected to go into specifics. Press secretary Dana Perino said he would demand that any plan be effective, simple and temporary.

Bush and congressional leaders from both parties consulted via conference call Thursday for about 30 minutes. Both sides basically were in agreement that they needed to cooperate to do something quickly, Perino said.

"There is reason to be hopeful when the president recognizes there is a problem in the country," House Speaker Nancy Pelosi, D-Calif., said afterward. She has talked of a package totaling $100-billion or more.

The rush to swing behind a stimulus plan underscored the political imperative of responding to a growing concern about the possibility of recession.

House Republican leader John Boehner of Ohio said he was encouraged, and so did Majority Leader Steny Hoyer, D-Md. Hoyer said of his counterpart, "He indicated that he wants to work together to get something done."

Pelosi said she wanted legislation approved within a month and said the government must "spend the money, invest the resources, give the tax relief in a way that again injects demand into the economy, puts it in the hands of those who need it most and into the middle class ... so that we can create jobs."

But Boehner said: "For this bill to become law, it cannot become a Christmas tree" for Democrats to attach their programs to. "It's hard to get anything moving within a year, and most of us believe that if we're going to have a stimulative effect at helping to revive what is becoming a sluggish economy, it needs to happen quickly."

Sen. Harry Reid, D-Nev., the majority leader, blasted Bush for scheduling public remarks on the issue before a deal has been struck.

White House spokesman Tony Fratto said Bush does not believe a stimulus should be offset - or paid for - by any tax or spending changes elsewhere. Some deficit-hawk Democrats have pushed for one, but it is not expected to be part of a package.

What's in the mix for economic relief

Some ideas for an economic stimulus package being considered by House lawmakers:

Tax rebates: All sides agree that tax rebate checks - up to $500 for individuals and more for married couples and people with children - would be in any final stimulus measure. The White House was pushing for even higher rebates. The rebates are likely to be limited to individuals with incomes less than $85,000 and couples earning $110,000 or less. Democrats want to extend the rebates to people who work but earn too little to have to pay income taxes.

Business tax writeoffs: Republicans and President Bush are pushing so-called bonus depreciation, which gives businesses extra incentive to invest in property and equipment. They are also backing more generous expensing rules permitting smaller businesses to immediately write off equipment purchases. Businesses suffering losses now would be able to charge them against earlier profits to reclaim taxes previously paid.

Unemployment insurance: Democrats want to extend unemployment benefits for people whose benefits run out after 26 weeks, and may press to both increase benefits and provide them to a wider range of people, such as part-time workers.

Food stamps: Democrats want to boost food stamp benefits on the theory that low-income recipients will quickly spend that money. Republicans are opposed, but are likely to accept some increase.

Medicaid: Democrats are pressing to raise Medicaid payments to states, an element of a 2003 economic plan signed by Bush.

[Last modified January 18, 2008, 01:30:32]