Congress and the economy: After stimulus bill, what next?

The prospect of a sputtering economy in an election year all but ensured the swift passage of a $152 billion stimulus plan in Congress last week.

But the plan is just the start of a legislative session that is shifting focus from the Iraq war to America's economic woes.

In the rush to complete a stimulus bill that would be timely, lawmakers dropped proposals ranging from extending unemployment insurance to beefing up alternative tax credits. All are grist for the debate over 2009 fiscal spending or add-ons to other legislation this year.

"This [stimulus bill] appears to be what is possible now, but there is more to be done. Almost all these issues will be revisited – and in the not-too-distant future," says Sen. Kent Conrad (D) of North Dakota, who chairs the Senate Budget Committee.

Other proposals that didn't survive included targeting relief to homeowners caught up in the home foreclosure crisis or contending with soaring home heating costs this winter.

Even before the White House signing ceremony, expected this week, the Internal Revenue Service is preparing to send rebate checks to some 130 million families.

Along with these checks, the plan aims to increase investment tax breaks, and to expand refinancing opportunities in the housing market. It passed the Senate by a vote of 81 to 16 Thursday, and, just hours later, by a House vote of 380 to 34.

"This economic-growth package is an example of bipartisan cooperation at a time when the American people most expect it," said President Bush in a statement after the final House vote.

This rare surge of bipartisanship followed close consultation among congressional leaders and Treasury Secretary Henry Paulson - and a press from lobbyists and constituents eager to know when their checks would be in the mail. (Answer: Taxpayers who file their 2007 tax returns on time can expect checks as early as May.)

At the heart of the deal are hundreds of dollars in "recovery rebate" checks to consumers and tax breaks to businesses. To qualify for rebate checks, individuals must be legal residents of the United States and earn at least $3,000, including Social Security income and veterans' disability payments. Checks range from $300 to $600 for individuals and $600 to $1,200 for married couples, plus an additional $300 for each child.

Two compromises paved the way for the agreement: A House deal expanded eligibility for rebate checks to lower-income groups, and a Senate deal added low-income seniors and disabled veterans, while drawing the line on adding anything else.

Negotiations on a plan began in the House, where Democratic leaders convinced the White House to expand eligibility for checks to some 35 million working families who made too little to pay income taxes – and phase out those with adjusted gross incomes of $75,000 for individuals and $150,000 for married couples.

"For the first time, tens of millions of low-income working people, who have been excluded from past stimulus laws, will benefit from recovery rebates and the child tax credit," said House Speaker Nancy Pelosi in a statement Thursday.

The first draft of a stimulus plan, announced Jan. 24, passed the House but appeared to bog down in the Senate. Senate Democrats, backed by eight Republicans, tried to add $43 billion in additional spending, including extended unemployment benefits, alternative-energy tax credits, home-heating subsidies for low-income households, public works projects, and more support for nutrition programs. But they fell one vote short in a vote Wednesday.

At the request of Senate majority leader Harry Reid, Sens. Hillary Rodham Clinton (D) of New York and Barack Obama (D) of Illinois came off the presidential campaign trail to return to Washington to vote for the measure. Sen. John McCain (R) of Arizona, the leading GOP contender, was the lone Senate absentee.

The battle for the final Republican vote went on until Senator Reid agreed to allow a GOP amendment to the bill, which added 20 million seniors and 250,000 disabled veterans to those receiving rebates under the House plan. They also voted to close a loophole that critics said could have allowed checks for those working in the US illegally.

"I've been home quite a bit lately and that's what people have been talking about: seniors, veterans, and immigration. That was the glue that kept this deal together," says Sen. Ted Stevens (R) of Alaska, who drafted the GOP amendment.

Democrats and outside groups lobbied a handful of GOP senators in a bid to tip the vote toward a larger stimulus bill. The AARP, the largest lobby for people over 50, ran full-page ads on the theme: "Millions of people are watching how their Senators vote on Economic Stimulus – no pressure."

Now, lawmakers in both parties say Congress must take up longer-term measures to revive the US economy. Republicans are urging permanent extension of the Bush tax cuts set to expire in 2010.

"While this measure should help get our economy moving in the short term, it should be just the beginning of our efforts to improve our economic competitiveness over the long term," said House GOP leader John Boehner, after the vote.

Democrats are gearing up for a wide-ranging second stimulus plan, which could include a debate over the tax code. In the Democratic Radio Address Saturday, Rep. Charles Rangel (D) of New York called the stimulus bill "a good first step." But the chairman of the House Ways and Means Committee also called for a more equitable tax code.