WASHINGTON — Hoping to jolt the ailing economy -- and counter criticism that Washington is too divided to come to Americans' aid -- House leaders and the Bush administration reached a deal Thursday on a package of tax breaks and mortgage rules designed to put more money in consumers' hands and stimulate business investment.
The centerpiece of the plan is a rebate of as much as $1,200 per household -- even more for families with children -- that could be mailed to most taxpayers as soon as late spring. The package also includes temporary tax breaks to encourage businesses to expand and create more jobs this year.
And in a provision crucial to high-housing-cost states such as California, there would be a significant one-year increase in the size of mortgages that could be backed by the government. That would make it far easier for homeowners to refinance into more affordable mortgages.
Economists said the package, meant to forestall or soften a feared economic recession, should provide a significant psychological boost to the economy. But it still might not be enough to prevent a slowdown.
"It is a nice shot in the arm," said Peter Morici, a professor at the University of Maryland. "It reduces the likelihood of a recession, but doesn't eliminate it. Overall, the slowdown will be less severe, but that doesn't mean that the economy won't still slow down."
The move comes at a time when Americans are growing increasingly worried about the economic outlook. A Los Angeles Times/Bloomberg poll released today shows that 79% of respondents are convinced there will be a recession this year.
The cost of the economic stimulus package, some details of which remain murky, would be roughly $140 billion -- $100 billion for the rebates and $40 billion for the business tax incentives. Leaders have set a deadline of Feb. 15 for passing the legislation, although it remained to be seen whether the Senate would leave the deal intact.
Still, all sides hailed Thursday's action as a stunning compromise between parties and branches of government that have been rendered largely dysfunctional by partisan differences.
"I can't say that I'm totally pleased with the package, but I do know that it will help stimulate the economy," House Speaker Nancy Pelosi (D-San Francisco) said. "And if it does not, then there will be more to come."
At the White House, President Bush called the agreement "an effective, robust and temporary set of incentives."
