House Passes Scaled-Down Stimulus Bill

By JANET HOOK

March 8, 2002 12 AM PT

TIMES STAFF WRITER

WASHINGTON — After months of fruitless partisan bickering, the House on Thursday overwhelmingly approved a stripped-down bill to bolster the economy by providing new unemployment benefits and modest business tax breaks, including one eagerly sought by the high-technology industry.

The Democratic-controlled Senate is expected to pass the bill today, and President Bush said he would sign it.

Congressional debate over how to strengthen the economy has raged for so long that it may have outlasted the recession. Shortly before the House vote, Federal Reserve Chairman Alan Greenspan gave Congress an upbeat assessment of the economy, saying, “An economic expansion is already underway.”

Greenspan also said: “I doubt very much that the economy, if it didn’t get a stimulus, would sag.”

But House Ways and Means Committee Chairman William M. Thomas (R-Bakersfield) said: “It may not help a whole lot, but it will not hurt.”

The 417-3 vote in the House broke an impasse over economic policy, as Republicans backed down from the more controversial tax cuts that President Bush sought to spur job creation. Democrats agreed to accept more limited benefits for the unemployed than they wanted.

Nearly six months after the Sept. 11 terrorist attacks hurt an already struggling economy, pressure has mounted for Congress to move ahead with the short list of anti-recession measures that both parties embrace.

Bush quickly praised Thursday’s House action, even though the compromise bill leaves out some of his tax-cutting priorities. “We’ve had too much non-movement on this important issue. And it’s time to go. Time to get a bill,” he said.

“This is the last game in town,” Thomas said as he pushed for the bill’s passage. “We all play today or we go home to our constituents and say we did nothing to help you because we let politics matter more than your economic future.”

The legislation would pump $51 billion into the economy this year, $43 billion in 2003 and $29 billion in 2004, congressional analysts say. Those are relatively small amounts in an economy that produces about $10.2 trillion in goods and services annually.

The compromise measure would allow jobless people who exhaust their 26 weeks of unemployment benefits to get 13 more weeks of aid--and even more in California and other states with especially high unemployment. The bill’s business tax breaks aim to encourage investment in equipment and software, a boon to the high-tech industry, which is still suffering even as much of the rest of the economy improves.

The belated action on the economic stimulus bill underscores how hard it is for a narrowly and bitterly divided Congress to agree on major policy matters.

“Congress is not known for being ahead of the curve on any issue,” said Rep. Rob Portman (R-Ohio).

In past recessions, Congress passed extensions of unemployment benefits with relatively little controversy. But the debate on the anti-recession proposals that emerged after Sept. 11 became particularly contentious because it got swept up in jockeying to define the parties’ differences as the November elections approach.

Bush and most Republicans gave priority to cutting taxes to put more money in the hands of consumers and businesses; Democrats were more concerned about providing aid to the unemployed. The Republican-controlled House passed several versions of its stimulus plan in recent months; the Senate deadlocked and managed to pass only a simple extension of unemployment benefits.

The impasse was broken when House GOP leaders this week decided to add only the least controversial tax cuts to the Senate’s unemployment benefits bill.

Jettisoned from the House measure was Bush’s proposal to speed implementation of the cut in income tax rates that was approved last year. Also dropped were GOP proposals to repeal a tax on corporations known as the alternative minimum tax and proposals to provide tax credits to help the unemployed buy health insurance.

More surprising, the bill dropped a popular but costly provision that had enjoyed broad bipartisan support: payments to mostly lower-income people who did not receive income tax rebates as a result of the tax cut enacted last year.

For the jobless, the bill would allow the additional 13 weeks of benefits for anyone who exhausted their regular benefits after Sept. 11. Those losing a job through the end of this year would be eligible for the extended benefit.

The bill also would allow another 13-week extension of benefits in states where unemployment is higher than 4%. California’s unemployment rate was 6.2% in January. According to the Center on Budget and Policy Priorities, an estimated 303,000 people in California will run out of their regular unemployment benefits in the first half of 2002. The center estimates that 153,000 people in California already exhausted their benefits from Sept. 11 to Dec. 31.

The extra benefits would total an estimated $8.5 billion this year and $4.8 billion in 2003.

Of the few tax cuts retained in the compromise, the most significant was the one sought by the high-technology lobby: a three-year provision to make it easier for business to write off the cost of buying equipment, software and other capital assets. The bill allows businesses to immediately write off 30% of new capital investments.

Computer companies and other high-tech interests made that a priority because they hope to boost demand for computers and other electronic equipment by allowing purchasers to write off a larger share of the cost immediately.

“We’re delighted with the action taken by the House,” said Ralph Hellmann, lobbyist for the Information Technology Industry Council. “It’s going to be very good for the high-tech industry, which is still bumping along and hoping to regain the strength it had in the 1990s.”

That tax break is worth an estimated $32 billion in 2003 alone, according to congressional analysts.

The bill also would extend a raft of tax breaks that expired at the end of 2001--including one for employers who hire welfare recipients and another for financial companies with overseas income. And it includes $5 billion in tax incentives over 10 years to help New York recover from the Sept. 11 attacks.

Democrats welcomed the compromise but complained that it took Republicans too long to arrive at it.

“This is a hardheaded lot we have here in the House leadership,” said House Minority Leader Richard A. Gephardt (D-Mo.).

“They are always out of step with everybody else on what is moderate and sensible and reasonable to do.”

Republicans blamed the intransigence of Senate Democrats who blocked the several versions of the broader bill passed by the House.