RISMEDIA, February 3, 2009-(MCT)-The U.S. Senate this week will debate the future of the American economy. Everything’s up for discussion and subject to largely unpredictable votes: How to levy taxes, create jobs, help people buy homes, reinvigorate ailing state and local governments.
And because of the Senate’s quirky way of doing business-as well as a growing sense that the plan passed by the House last week is flawed-almost any idea could win or lose.
Officially, senators are considering an $889 billion stimulus package, as economic news grows grimmer. Fresh in their minds is Friday’s new data showing the economy shrank 3.8% in the fourth quarter of 2008, its worst quarterly decline in nearly 27 years, and the prospect that January unemployment figures, due out this Friday, will show more staggering job losses.
Votes on specific proposal are likely to start today, with final passage by the end of the week. It will be, said Senate Majority Leader Harry Reid, D-Nevada, “a long, hard slog.”
The Senate will start with a blueprint that includes $342 billion in tax cuts, some $67 billion more than the House included in its version last week. The biggest difference is the Senate’s inclusion of a break in the alternative minimum tax for an estimated 24 million people this year.
The biggest tax cut, though, is virtually the same as one passed by the House, an effective $500 per person rebate for most taxpayers in 2009 and 2010. Total cost: An estimated $142 billion.
That’s not enough, though, for many Republicans, who will push to lower tax rates now paid by lower and middle-income taxpayers.
They say that rebates do not provide enough money to jolt an economy mired in what’s likely to be the worst recession since World War II.
When people got rebates from the 2008 stimulus, “they paid down their individual debt . . . but they didn’t take the money and go out and buy a car,” said Sen. Robert Bennett, R-Utah.
Instead, Republicans will seek to lower the current 15 and 10% income tax rates by 5 percentage points each.
Currently, married couples pay a 10% tax on income up to $16,700. Reducing that rate would save about $500 per couple.
Republicans would also lower the 15% rate now levied on couples earning between $16,700 and $67,900, saving working couples another $1,100, according to Republican estimates. Single filers would get similar reductions either way, and, said GOP Senate Leader Mitch McConnell, “everyone who works and pays income tax would see an immediate increase in pay.”
Democrats have resisted such cuts, saying the bill already consists of about 30% tax cuts.
More likely areas of agreement could involve infrastructure, housing and a corporate tax break.
There’s a lot of sentiment to include more for rebuilding roads, bridges and other public works projects. About $27 billion is devoted to highway projects, $8.4 billion for public transportation and $5.5 billion for “competitive grants to state and local governments for transportation investments.”
Sen. James Inhofe, R-Okla., suggested spending far more, and got some Democratic backing, at least in principle, as Sen. Patty Murray, D-Wash., plans to offer a proposal that would boost infrastructure spending. Sen. Charles Schumer, D-N.Y., estimated Sunday on CBS’ “Face the Nation” that $20 to $30 billion more could be proposed.
Republicans are piecing together a housing package that could include a plan for the federal government to guarantee 4% mortgages and make them available for a limited amount of time. Current rates are around 5%.
GOP lawmakers estimate that the average family would see its monthly mortgage payment drop by $466 a month, or $5,600 a year. Over the life of a 30-year loan, that’s a savings of $167,760.
The cost of the program is unclear, but Republican Policy Committee Chairman John Ensign of Nevada is promoting the idea.
“You have to fix housing; otherwise I don’t think the economy is going to recover,” he said. Schumer had similar thoughts: “I think we’ll get some real agreement on the housing part,” he said.
The corporate break would involve what’s called “repatriation,” meaning companies can bring back foreign earnings and have them taxed in this country at a temporarily reduced rate.
The change is seen as a way to prod firms to spend more in this country, and would cost the government about $40 billion.
Democrats control 58 Senate seats, meaning they need only two Republicans to stop a filibuster, and both sides are talking cooperation. As Senate Assistant Majority Leader Richard Durbin, D-Ill., told Fox News Sunday, “We’re open about this.”
© 2009, McClatchy-Tribune Information Services.