Congress OKs $168-billion stimulus package

In rare bipartisan compromise, Congress approved a two-year, $168-billion economic stimulus package today that will send rebate checks to millions of low- and middle-income Americans, including senior citizens and disabled veterans.

The measure – which came after a concession by Senate Democrats who had demanded substantially more aid – will become law as soon as next week.

Rebate checks should begin arriving in mailboxes beginning in May.

“This plan is robust, broad-based, timely, and it will be effective,” President Bush said, welcoming the deal in a statement this evening.

The president, whose administration was unusually open to negotiating with Democrats, also called it “an example of bipartisan cooperation at a time when the American people most expect it.”

The stimulus legislation cleared the Senate 81-16 this afternoon after Democrats gave up their attempt to pressure GOP lawmakers into backing a more expansive package. Hours later, the House, which had passed a smaller stimulus bill last month, approved it 380-34.

“What counts is the result,” said Senate Finance Committee Chairman Max Baucus (D-Mont.), who helped lead the unsuccessful Democratic drive for a larger package. “This is a big victory.”

The congressional action came amid mounting evidence of an impending recession. Last month, the economy lost jobs for the first time in more than four years.

The Federal Reserve has moved to ease credit and increase the money supply by slashing interest rates five times since the summer, including a rare emergency cut in mid-January.

Congress controls the other major public levers of economic influence: government spending and taxes. And for nearly a month lawmakers debated how to put more cash into consumers’ hands to spur demand. Under the terms of the package, single filers will get a maximum $600 rebate, which will phase out for taxpayers with adjusted gross incomes between $75,000 and $87,000.

Married couples will get a maximum $1,200 rebate, which will phase out between $150,000 and $174,000 in income.

In addition, parents will get $300 for each child.

With the Senate vote today, more than 20 million senior citizens living on Social Security, as well as about 250,000 disabled veterans and spouses of deceased disabled veterans, who were not covered in the House package, will now be eligible for the rebate checks.

The stimulus legislation will also provide a series of tax breaks designed to spur business to invest in new equipment to help them expand in the economic slowdown.

And in a provision that could benefit California and other states with high housing costs, the measure includes a large one-year increase in the size of mortgages that can be backed by the government – up to $729,750 – making it easier for homeowners to refinance into more affordable mortgages.

The Senate measure – co-sponsored by senior Senate Democrats and Republicans – also includes provisions to ensure illegal immigrants do not get rebate checks.

The stimulus package approved today will likely give the economy at least a small jolt, according to economists. But many believe it could have been more effective with even more direct spending rather than business tax breaks.

“It’s not an optimal package,” said Jared Bernstein, an economist with the Democratic-leaning Economic Policy Institute. “From the perspective of bang for the buck, you could have crafted a more effective package.”

Bernstein said research shows that business tax incentives are the least effective means of stimulating the economy while extending unemployment benefits are the best. For every dollar spent on business tax incentives, the economy gains 27 cents of growth, he said, while a dollar of unemployment benefits leads to $1.64 of economic growth.

Last month, the nonpartisan Congressional Budget Office also pointed to direct aid to low-income Americans through unemployment benefits and food stamps as more effective than even rebate checks for pumping money quickly into an ailing economy.

But there was fierce GOP resistance to extending unemployment benefits, which many Republicans argue would discourage jobless Americans from looking for work.

In the end, the stimulus bill was as much a political document as an economic one.

The congressional effort to craft a package began as a quickly negotiated deal between House Speaker Nancy Pelosi (D-San Francisco), House Minority Leader John A. Boehner (R-Ohio) and Treasury Secretary Henry M. Paulson.

As debate shifted to the Senate two weeks ago, the fate of that agreement seemed in doubt. Democrats tried for two weeks to add billions of dollars of additional aid over the objections of many Republicans, as well as House Democratic leaders.

Wednesday evening, they forced a vote on their more costly alternative, which would have extended unemployment benefits for out-of-work Americans, given additional tax breaks to renewable energy producers, and provided aid to those struggling to pay their heating bills.

It also would have sent rebate checks to seniors and disabled veterans.

The effort by Senate Majority Leader Harry Reid (D-Nev.) to bully Republican lawmakers with warnings that they would pay a political price for opposing the additional assistance failed, however. Democrats won just eight GOP votes for their package, one shy of what was needed for the 60-vote supermajority required to overcome a filibuster.

Wednesday’s vote set off a flurry of activity at the Democratic Senate Campaign Committee, which immediately issued a news release excoriating Republican senators for voting against senior citizens and others.

The vote also drew an acid response from AARP, the main advocate for retirees, whose chief lobbyist, David Sloane, said: “We expect the Senate to fix this.”

By today, Pelosi was openly questioning the tactics of Senate Democrats. “I don’t think any change in the bill is really worth the delay,” she said at a Capitol news conference.

This morning, senior Senate Democrats talked to the White House to assure themselves that the president would support their amendment with rebates for seniors and disabled veterans. And by mid-afternoon, Reid went to the floor of the Senate to announce the deal.

Forty-seven Democrats – including Californians Barbara Boxer and Dianne Feinstein – voted for the measure, as did 37 Republicans, including presidential candidate John McCain of Arizona, and two independents. Democratic presidents candidates Hillary Rodham Clinton of New York and Barack Obama of Illinois missed the vote.

Talking to reporters today, the Senate majority leader kept up the political pressure on Republicans. “They are following this president off a cliff,” Reid said.

But he acknowledged that he could no longer hold up the stimulus legislation in an attempt to force more Republicans to break.

“We would rather have had a more robust package,” Reid said. “But we had to finish this quickly.”

noam.levey@latimes.com

Times staff writer Maura Reynolds contributed to this report.