US Congress finally approves a USD 168 bn fiscal package to jumpstart the ailing economy

The US Congress has finally approved the Fiscal stimulus bill intended to complement the Fed's endeavor to stave off a recession in the ailing US economy, albeit with a few addendums as suggested by the Senate. Earlier, the proposed fiscal stimulus plan had received a major setback after most Republicans stuck together to oppose a bid by the Democrats to add USD 44 bn in help for the elderly, disabled veterans, the unemployed and businesses to the House-passed economic aid package. However, valuing the urgency of the situation, especially in an election year, the two parties quickly settled matters, with the Democrats dropping their demand for extra spending and tax breaks. With the Senate having given its final approval(81-16 vote) to a USD 168 bn fiscal stimulus package ,revised up from USD 150 bn passed by the House earlier, the House quickly adopted the proposed changes to set the ball rolling as soon as possible (380-34 vote). The bill is expected to benefit around 130 mn U.S. households who would be receiving tax rebates this spring. Its now just a matter of time before the Bill gets a a sign off from the U.S. President as he has already made clear he intends to sign the legislation, calling it "an example of bipartisan cooperation at a time when the American people most expect it."

While sticking to the proposals of the earlier bill passed by the House, the Senate generated an additional provision intended to benefit Social Security veterans and military veterans, as well as their surviving spouses . The final bill extends the smaller rebates of USD 300 (for individuals) or USD 600 (for married couples) to this group apart from those who don't pay income taxes but have incomes of at least USD 3,000 . This adds more than 20 mn social security recipients and disable veterans to the rebate program. The Senate also succeeded in dropping two other proposals, namely, the renewable energy tax incentives along with a provision that would have allowed companies such as home builders to get tax refunds from past years when they were profitable.



Highlights of the final package are as follows:

Tax rebates and incentives to stimulate consumption spending

• Most income tax payers to receive USD 600; working couples USD 1,200
• Workers who earn at least USD 3,000 but don't pay taxes, to receive checks of USD 300-600.This group would include Social Security recipients and military veterans receiving disability payments, as well as their surviving spouses -- a provision generated by the Senate.
• People under both categories to get an extra USD 300 per child
• Rebates would be phased out for those families earning more than USD150,000
• No rebates for those earning more than USD 174,000, unless they have children
  

Housing Related

• Dollar limit on mortgages that can be bought by Fannie Mae and Freddie Mac to be raised above USD 600,000 and perhaps as high as USD 730,000, from the current limit of USD 417,000
  

Business tax write-offs

• Additional 50% write-off on capital-equipment investments made this year
• Small businesses to be able to write off USD 250,000 from their taxes, up from USD 125,000