WASHINGTON (Reuters) - President George W. Bush and congressional leaders agreed on Thursday on a $150 billion package of tax rebates and business incentives meant to ward off a recession in the world's largest economy.
The deal between the White House and leaders of the House of Representatives provides for tax rebates of up to $600 for individuals and $1,200 for married couples. Families with children would receive an additional $300 per child.
It marked a rare show of election-year cooperation between Bush and the Democratic-led Congress who want to pump money into the softening economy in hopes of countering the blow from a mortgage crisis, credit crunch and a surge in oil prices.
"This agreement was the result of intensive discussions and many phone calls, late-night meetings and the kind of cooperation that some predicted was not possible here in Washington," Bush told reporters.
The hope is that the package will help calm fears of a U.S. recession and encourage consumer and business spending to boost economic growth.
The legislation is intended to work in tandem actions by the Federal Reserve, which cut a key interest rate by three-quarters of a percentage point on Tuesday. Financial markets appear to have been buoyed by the developments.
The Dow Jones industrial average closed up 108 points at 12378.61 as news of the stimulus deal helped lift investor sentiment.
House Speaker Nancy Pelosi, House Republican Leader John Boehner and Treasury Secretary Henry Paulson hammered out the deal after Bush returned from a Middle East trip a week ago.
"It is timely, it is targeted and it is temporary and it was done in record time since our conversation with the president," Pelosi said.
But the California lawmaker suggested that Democrats might propose additional legislation if the stimulus package fails to spur the economy.
"I can't say that I'm totally pleased with the package," she said. "But ... I do know that it will help stimulate the economy, and if it does not then there will be more to come."
ONE PERCENT OF GDP
The proposal could undergo some changes when it reaches the Senate, where its price tag could climb even higher than the current $150 billion, or about 1 percent of U.S. gross domestic product.
John Sweeney, president of the AFL-CIO labor federation said the deal was not enough. "It is up to the Senate to extend unemployment benefits and increase food stamps to get money into the hands of those who will spend it quickest and need it most," he said in a statement.
Senate Majority Leader Harry Reid said he hoped the plan could be sent to Bush's desk to be signed into law by mid-February.
But Reid held open the possibility of additions to the bill. "We're going to take another look at it when it comes here (to the Senate)," the Nevada Democrat said.
The plan also includes provisions aimed at shoring up the battered housing market by increasing the size of mortgages that can be insured by the Federal Housing Administration and temporarily boosting the size of "conforming mortgages" to nearly $730,000 that can be financed by housing giants Fannie Mae and Freddie Mac. This would help lower the interest rates on these high-cost loans.
The rebate plan would phase out for higher income people -- individuals making more than $75,000 in adjusted gross income and married couples making more than $150,000. Paulson said that for every $1,000 over those income levels, the rebates would be reduced by 5 percent.
One issue of contention was whether the rebates would be distributed only to those who paid income taxes or whether low-income people who do not earn enough to owe taxes would also receive cash. Democrats had sought to ensure that the rebates would be given to these workers as well.
Under the package, workers who reported income of at least $3,000 last year and paid no income taxes would be eligible for a check of $300 for individuals and up to $600 for married couples. They would also be eligible for the child rebates.
The package includes incentives for businesses to make new equipment purchases and other investments. Businesses would be able to immediately deduct 50 percent of the costs. Small businesses would be able to immediately write off up to $250,000 in purchases.
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