The U.S. Senate voted on Thursday to pass a stimulus bill similar to the one the House of Representatives passed earlier and that resulted from negotiations between House Speaker Nancy Pelosi, House Minority Leader John Boehner, and Treasury Secretary Henry Paulson. The final bill, which was quickly approved afterwards by the House and will now be signed by President Bush, is a bit broader than the original House bill because it extends eligibility for rebates to people who have income from Social Security or veterans' disability benefits but little or no earnings.
This came after Republicans in the Senate succeeded Wednesday night in maintaining a filibuster -- by just one vote -- of the stimulus plan that had been passed out of the Senate Finance Committee last week. The Senate Finance bill was broader, most notably because it would have extended regular unemployment insurance benefits from 13 weeks to 26 weeks.
The filibuster seems to be driven by the conservative ideological principle that tax cuts are always good while public spending is usually bad. Republican Senators and the President could agree with Democrats on the need to provide tax rebates, but could not accept extended unemployment benefits. But the entire point of a stimulus bill is to stimulate the economy. Analysts have found that extending unemployment benefits is actually one of the most effective ways to stimulate the economy because it gives money to people who are most likely to immediately spend it. The tax rebates are likely to be helpful in stimulating the economy, but not quite as effective as extended unemployment insurance benefits. In some cases the rebates will not be spent immediately, meaning they will provide somewhat less of a boost to the economy.
The bill approved Thursday provides a rebate equal to income tax liability up to a maximum of $600 ($1,200 for married couples) and provides a minimum rebate of $300 ($600 for married couples). The bill also provides an additional $300 per dependent child. Eligibility begins to phase out for taxpayers with incomes of $75,000 ($150,000 for married couples).
The original House bill would have made the rebates available only for taxpayers with earnings of at least $3,000, while the bill passed on Thursday includes the Senate Finance Committee's provision that makes the rebates available for taxpayers whose combined earnings, Social Security benefits and veterans' disability or survivor benefits equal at least $3,000.
Final Bill Narrower than the Bill Republicans Filibustered
Several provisions from the Senate Finance Committee's bill that Republicans filibustered were not adopted in the final version. The Senate Finance bill would have provided $500 rebates to all taxpayers ($1,000 for married couples) under the income limits, whereas the final bill gives taxpayers at the lowest income levels rebates that are only half as high ($300, or $600 for couples) as the full rebate. The Finance Committee bill also included the extension of unemployment insurance, which was a bone of contention between Senate Democrats, who all supported the extension, and Republicans, who mostly opposed it.
The final bill does not include the additional business and energy tax cuts that the Finance Committee added but does include the two business tax breaks in the original House version. The first is so-called bonus depreciation (allowing businesses to immediately write off 50 percent of equipment and other capital) and the second doubles the amount of certain investments that small businesses can immediately expense from $125,000 to $250,000. Since investment usually requires some time for planning and implementation, these are unlikely to provide the sort of immediate boost that is needed to forestall or counteract a recession. The business tax cuts make up less than a third of the total costs of the bill, however, with the rebate provisions making up the rest.