Deal on $150bn US stimulus package

Deal on $150bn US stimulus package

By James Politi and Jeremy Grant in Washington

Published: January 24 2008 09:48 | Last updated: January 25 2008 00:37

Leaders of the US House of Representatives and the Bush administration reached an agreement on Thursday on a $150bn fiscal stimulus package to stave off a recession.

The deal will provide cheques of between $300 and $1,200 to some 117m Americans, with payments phasing out for individuals earning more than $75,000 a year and couples earning more than $150,000 a year. Other measures include new tax breaks for large companies and small businesses, designed to bolster investment, and a lifting of the limit for the purchase of mortgages by Fannie Mae and Freddie Mac from $417,000 to $625,000.

Nancy Pelosi, Democratic speaker of the House, said: “This is a remarkable package because it is about putting money in the hands of America’s working families.” But she said it “doesn’t mean we have exhausted all the remedies” for the ailing economy, acknowledging dissatisfaction with elements of the proposal.

The speed at which a deal was reached shows the depth of bipartisan concern in Washington over the need for rapid action to avert a recession in the world’s largest economy. Talks over the stimulus package have risen dramatically to the top of the political agenda since the beginning of the year. In an attempt to address concerns that the effect of the stimulus might already kick in too late, Hank Paulson, Treasury secretary, said the aim was to send the payments as early as May.

The contents of the package could still be altered as it makes its way through the Senate. In particular, some Democrats could be unhappy with concessions made by Ms Pelosi, such as the exclusion of an increase in food stamps, the lack of an extension of unemployment benefits and no money for infrastructure spending.

“I have some concerns about the substance, as I hear it,” Senator Max Baucus, chairman of the Senate finance committee, said after a hearing into how a stimulus package could be structured. But he said there was still bipartisan consensus on reaching a deal quickly. He and the top-ranked Republican on the committee, Chuck Grassley, would start work on a bill next week that he believed would help speed passage of an eventual House bill -- and thus overall congressional legislation.

“Nobody wants to be responsible for holding up a good stimulus bill. There is a train going down the track here that wants to keep this stimulus package narrowly targeted for the greatest economic impact as quickly as possible,” Mr Baucus said.

Asked if the package could go higher than $150bn, he said: “It might be expanded slightly, but not a lot.”

Up to a third of the stimulus is earmarked for tax breaks for large companies and small businesses. Lobbying groups such as the National Association of Manufacturers have pushed for provisions allowing more favourable treatment of equipment expenses and the “carry-back” of losses to previous more profitable years. The most significant concession by Republicans was to agree that the lowest $300 cheque could go to those who worked but owed no income tax.