Saturday, January 19, 2008
Bush, Democrats Spar on Stimulus
As President Bush laid out his vision for an economic stimulus that could reach $150 billion, Democrats in Congress and the administration diverged about how to spread around its benefits. --The White House wants tax cuts to help a wide range of individuals and businesses. --In addition to tax cuts, congressional Democrats say they also want spending targeted at specific groups such as the unemployed. --Administration officials said it would make room for roughly half a million jobs that otherwise wouldn't exist. In an interview, Treasury Secretary Henry Paulson said the president envisions certain business tax breaks that would be in place for no more than a year, to spur companies to make immediate investments. --But millions of lower-income workers pay no federal income tax because existing breaks wipe out their exposure. According to Jason Furman at the Brookings Institution, 57 million households would get no benefit. That includes about 30 million households with wage earnings. The rest are mostly retirees. There are about 149 million households in all, which means about 37% of the total would get no benefit. Conservatives question the fairness of giving rebates to people who paid no income tax. Republicans --Republicans want higher earners to be part of a tax rebate. Even some Democrats in the Senate are likely to want to push the $85,000 cap higher. The stimulus package currently under discussion mirrors the one introduced during the last downturn 2001: --In the summer of 2001, the government mailed a total of $38 billion in $300 and $600 one-time rebate checks to two-thirds of U.S. households. 2002: --a low allowed business to deduct 30% of investments upfront, for purchases from Sep 2001 to Sept 2004. The law was modified in 2003 to raise deduction to 50% for certain invesments bought after May 2003 to Jan 2005. --results are mixed. Many say the rebate checks, which were mailed only to U.S. taxpayers, successfully boosted spending. But certain business tax breaks from 2001 through 2004 had a more limited effect Now: --$800 for individuals and $1600 family --Both sides want to add tax incentives to encourage business to invest in equipment --Congress wants other elements to the package, including food stamps and unemployment.