CHN: Action on the Stimulus Package Delayed in the Senate
The road to passage of an economic stimulus package in response to an economic downturn still has some bumps to overcome. Still, all agree that in the end legislation will pass. The rush to act was accelerated by the growing consensus among economists and elected leaders that the rising unemployment rate, slowing growth in the economy, unprecedented housing foreclosure rates, and the number of large financial institutions in crisis are signs of a looming recession.
House Speaker Pelosi (D-CA) took up the role of brokering a deal with Treasury Secretary Summers, the Administration’s representative and Minority Leader Boehner (R-OH). Both sides agreed that they would not put forth a plan to the public prior to beginning talks. However, on the eve before negotiations were to begin the President released his plan, consisting of income tax rebates of $600 for individuals and $1200 for couples plus $300 for each child that would leave out millions of low-income families, and a package of business tax breaks allowing small businesses to double the amount of tax write-off on capital investments and all business to speed up depreciation on new plants and equipment.
Speaker Pelosi came to the table with a set of ideas aimed at increasing consumer spending and easing the burden of unemployment. These included: tax rebates that do reach low-income families; increases to states in the federal share of Medicaid; expansion of Unemployment Insurance (UI) benefits; a temporary increase in food stamp benefits; and money for housing counseling and mortgage refinancing. The elements in prior stimulus packages that were most successful in spurring spending were those that put money into the pockets of low- and moderate-income people who spend the money more quickly because a greater portion of their income is used to pay for basic needs. Among these, extending UI benefits and increasing food stamps have proven to be highly effective stimuli.
House Minority Leader Boehner and the Administration received what they wanted, except for agreeing to phase out rebates for the wealthiest at $75,000 for individuals and $150,000 for couples. Speaker Pelosi was able to reach agreement on providing a tax rebate of $300 for individuals and $600 for couples plus $300 for each child to those earning at least $3000 a year, who pay payroll taxes but do not have an income tax liability. This means that 35 million families who would not have received a rebate under the Administration’s proposal now stand to benefit. The House bill also contains a one year increase in the loan limits for families at risk of foreclosure through the Federal Housing Administration. However, left out of the House package are UI expansions, food stamp increases, and aid to states.
The House moved quickly on January 29 to pass with bipartisan support (385-35) the $146 billion Recovery Rebates and Economic Stimulus for the American People Act of 2008, H.R. 5140. While many House Democrats were bitterly disappointed that key elements were excluded from the bill, they are holding out the hope that the Senate’s version will include at least some of these provisions.
On Thursday, action shifted to the Senate Finance Committee, which has jurisdiction over taxes and unemployment insurance. The plan the Committee devised includes provisions that: equalize the rebates for those eligible, with all individuals receiving $500 and couples $1000; expand those receiving rebates to include seniors and others with Social Security income of at least $3000 and veterans with disabilities; increase the income level at which rebates phase out to $150,000 for individuals and $300,000 for couples; extend UI benefits for an additional 13 weeks after an unemployed person has exhausted at least 20 weeks of state benefits, plus 13 more weeks in states with a 3-month unemployment rate of at least 6.5 percent; and provide a one year extension of expiring energy tax cuts. The Committee’s $157 billion package passed 14-7 with 3 Republicans joining all Democrats in support.
The Senate Democrats’ strategy had been to add increases in food stamps and perhaps other provisions by amendment when the legislation goes to the Senate floor, likely to be Wednesday, February 6. However, opposition to the Finance Committee plan and further amendments is mounting under stiff lobbying from Senate Republican leadership and the White House. The rules require the House bill to be brought up first, subject to amendment. Adopting any amendment or a final bill will require 60 votes. There may be an attempt to substitute the Senate Finance Committee bill; if that fails, other amendments will be offered, such as including unemployment insurance, food stamps, or tax rebates for seniors and veterans. The willingness of the White House and Republican Senate leadership to stand in the way of these changes is putting the outcome for improving the House-passed version of the bill in jeopardy.
The newly released unemployment report for January shows the over-all unemployment rate basically unchanged after a big increase in December (from December to January, the jobless rate dropped from 5 percent to 4.9 percent, due in part to unemployed workers exhausting their benefits). However, an indication that unemployment remains a serious concern is the loss of 17,000 non-farm jobs reported in January when analysts were expecting a 75,000 increase in these jobs. Further, vulnerable populations did experience further job loss. The unemployment rate for African Americans jumped from 8.4 percent in November to 9.2 percent in January; for Hispanics, the rate rose from 5.7 percent to 6.3 percent; and the already high rate for youth rose from 16.4 percent to 18 percent. This data bolsters advocates’ arguments to Members of Congress to include extended UI, as well as an increase in food stamps and provide equitable tax rebates in the final stimulus bill.
Both parties have set a goal of sending a stimulus bill to the President by February 15.
For further information see:
CBPP paper on the effectiveness of UI and food stamps as economic stimuli: http://www.cbpp.org/1-22-08bud.htm