WASHINGTON — The Senate intends to introduce an economic stimulus plan today that is broader than the $150 billion package backed by President Bush and passed Tuesday in the House, potentially delaying tax rebates for millions of consumers and leaving the economy teetering on the brink of a recession.
Bush sent a strong warning to the Senate in his State of the Union address Monday night, signaling the much-needed boost to the economy could be delayed or derailed if lawmakers try to "load up the bill" with additional incentives.
The President also pressed Congress to approve free trade agreements with Colombia, Panama and South Korea in his seventh and final annual speech to the country. Bush faces significant opposition to those three pending trade pacts, as well as the rest of his domestic agenda, which has been overshadowed by public discontent over the war in Iraq and sent his approval rating into a downward spiral.
The economic stimulus package reached between Democratic and Republican House leaders and the White House is seen as one of the few areas where Bush might find common ground with Congress in his final year. The House plan, which passed on a vote of 385-35 on Tuesday, would provide tax rebates of up to $600 for individuals, $1,200 for couples and for those with children, and an additional $300 a child. The plan caps eligibility for the rebates at an income of $75,000 for individuals and $150,000 for couples. It would also provide $50 billion in business tax incentives for companies to invest in equipment.
The $156 billion plan unveiled Monday by Sen. Max Baucus (D., Mont.), chairman of the Senate Finance Committee, would provide $100 less per individual and $200 less per couple than the House package, but would broaden the coverage to include senior citizens living on Social Security and would not cap those eligible for rebates. Baucus' plan would include the same bonus of $300 a child and would also provide a 13-week extension of unemployment benefits and up to 26 additional weeks for those living in high unemployment states.
House Speaker Nancy Pelosi (D., Calif.), who spearheaded the compromise agreement with the administration, said in the House, "It is important in this package to have a level of discipline. It is important that this bill not get overloaded." Pelosi said she set aside some of her priorities to get a compromise and was satisfied with the results, a package that "puts $28 billion in the hands of 35 million families who have never received rebates or a child tax credit."Carol Guthrie, communications director for the Democratic staff of the Senate Finance Committee, said, "Chairman Baucus' view is that many senators wish to weigh in on an economic stimulus legislation, and the work that the finance committee is doing will provide an orderly process of addressing concerns and adding needed measures to the package, all while we work with the White House and with House leadership to move toward a final bill."
Even though the bills would have to be reconciled in conference if the Senate does not simply take up the House measure, Guthrie said Baucus believes the committee's action will speed up, not slow down, the passage of an economic stimulus bill, although she did not explain how.
While lawmakers battle it out on Capitol Hill, economists and business groups are closely watching for signs of a breakthrough that will move the legislation quickly to the President's desk.
"What we've said is we want Congress to act quickly in putting money in consumers' hands, particularly low- to middle-income Americans who are going to spend it and continue to keep the economy moving forward," said Steve Pfister, senior vice president for government relations at the National Retail Federation. "The House and Senate can have legitimate differences and can reconcile them, but the longer it takes, the less impact it is going to have, and if it gets too bogged down and people get too dug in, this entire thing could collapse, which is something we don't want to see."
Paul Nolte, director of investments at Hinsdale Associates, a boutique investment firm in Chicago, said, "I think we've seen a lot of retailers perk up in the last couple of weeks in anticipation of something like that being implemented."
Nolte said broadline retailers, including Wal-Mart Stores Inc., Target Corp. and Kohl's Corp., will benefit most from the anticipated jump in consumer spending. Despite a short-term boost for retailers, Nolte said the economy as a whole, which his firm has determined is in a recession, will not gain much from a short-term stimulus.
"In order to have consumer spending at any sustained level, you need a much lower level of personal debt," said Nolte. "What needs to happen in our opinion is a little more to address the issues of consumer debt. Unfortunately, you can't legislate that."