The House passed an economic stimulus package this week. The deal, brokered by Speaker Pelosi and Minority Leader Boehner, in concert with President Bush, provides a timely, temporary and targeted boost to the U.S. economy in order to avoid a looming recession or lessen its impact.
But what do these sound-bite friendly descriptions mean? “Timely” refers to the need for a stimulus package to be enacted quickly. In past years, political wrangling and partisan bickering have resulted in stimulus packages being delayed so long that the country is no longer in recession when the economic boost is realized. “Temporary” speaks to the practice of including permanent and far-reaching policy changes in stimulus packages; using economic anxiety to bring about changes in other less directly relevant policy areas. The phrase “targeted” is used to describe the goal of a stimulus package — to get money into the hands of those who need the extra income and will spend it, boosting the economy.
It looks better than 50-50 that our economy will hit a recession. How quickly we can enact this stimulus package may determine whether this is a short-lived economic downturn, similar to the downturn in the early 90’s and early 2000’s, or something longer and more painful.
The economic stimulus package passed by the House this week includes a tax rebate of $600 for every American making under $75,000 and $1,200 for couples earning up to $150,000 (including $300 per child). Small businesses will be allowed to double the amount they can write off on taxes for new investments. A one-year increase in Fannie Mae and Freddie Mac’s loan limits (from $417,000 to $729,000) and a permanent increase in the Federal Housing Administration’s loan limit (from $367,000 to $729,750) are also included.
The Senate is working on their version of the stimulus this week. I am hopeful they will produce a package that is very similar to the timely, temporary and targeted stimulus the House leadership negotiated with the White House. The deal brokered in the House included an agreement to exclude debate on extending the expensive, far-reaching Bush tax cuts. It avoids a visceral, partisan debate that would probably doom the stimulus’ chances for enactment. We will be watching what they produce very closely. Straying too far from the compromise could endanger the bipartisan agreement and ultimately leave the American people without the economic boost needed to help stave off a more serious recession.