US Congress sends $787 billion stimulus to Obama

(Agencies)
Updated: 2009-02-14 13:26

House Majority Leader Steny Hoyer chastised Republicans, saying they were sticking to the same economic precepts that proved a failure during the eight-year tenure of Republican President George W. Bush.

US President Barack Obama is pictured in the reflection of a mirror as he speaks on the economic stimulus package to be voted on Capitol Hill, during an event in the East Room of the White House in Washington February 13, 2009. [Agencies]

The massive new government spending will add significantly to federal budget deficits already shattering records. According to the nonpartisan Congressional Budget Office, the stimulus bill will increase next year's deficit alone by nearly $400 billion.

But Democrats have argued that without the stimulus spending, the economy will decline further, leading to even slower revenues that contribute to higher budget deficits.

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The White House said it would take about a month for the money to start flowing. A primary concern for economists is that the stimulus will come too late to do much good in 2009, when many forecasters think full-year output will contract.

"Unfortunately, the downward momentum in the economy is so steep that it is hard to see how the package can kick in quickly enough to make much difference to 2009," said Nigel Gault, chief US economist at IHS Global Insight.

The Democrats' quest for a new economic stimulus bill -- on top of the $162 billion one enacted a year ago -- actually began last July, when House leaders started crafting a much smaller measure of around $60 billion.

Then-President George W. Bush and his fellow Republicans in Congress blocked that bill, saying it was not needed yet.

As the US economy got markedly worse, Democrats pushed for larger stimulus measures. At one point, Congress was considering a $937 billion bill.

To win final passage, a group of Senate moderates crafted a compromise that shaved some of the tax-cut and spending provisions, finally arriving at the $787 billion bill, with most of the spending this year and next. The tax breaks are temporary.

The final package includes about $500 billion in spending and money for social programs like the Medicaid health insurance program for the poor. It has about $287 billion in tax cuts that include small tax incentives to spur home and automobile sales as well as business tax deductions.

Individuals would get a refundable tax credit championed by Obama of up to $400 per individual and $800 for couples in 2009 and 2010. It is phased out for individuals with adjusted incomes of over $75,000 and couples with incomes over $150,000.

The measure includes almost $54 billion to help states with their budget deficits and to modernize schools, $27.5 billion for highway projects, $8.4 billion for public transportation and $9.3 billion for Amtrak and high-speed rail service.

The final agreement also included limits on compensation for senior executives of companies receiving government aid from a $700 billion financial bailout, including restrictions on bonuses.

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