|House Democratic Leader Nancy Pelosi (Calif.) (Photo courtesy of the office of Nancy Pelosi)|
House Democrats, attempting to upstage President Bush by one day, unveiled a $136-billion economic stimulus package Jan. 6 that would offer tax relief to small businesses, accelerated depreciation to spark plant and equipment investment--and $5 billion for highway construction.
President Bush is scheduled to announce details of his economic stimulus plan Jan. 7 in a lunchtime speech before the Economic Club of Chicago. The cornerstone of that plan is expected to be elimination of the income tax on dividends.
House Democratic Leader Nancy Pelosi (Calif.) says the eight-part proposal would boost the economy in the near term, with most of the impact to occur in 2003. Democrats say that beyond 2003, their proposal contains virtually no spending increases or revenue reductions. That would allow the budget deficit to diminish as the economy rebounds, they contend.
The plan would allow small businesses to double the amount--from up to $25,000 to up to $50,000--they can deduct from income this year of the cost of new investments. To generate more spending on new plant and equipment this year, the Democrats also want to restructure the bonus depreciation scheme enacted last year. They would permit firms to write off a 50% bonus in 2003 which would drop to 10% in 2004. "We'll sweeten the bonus," says Rep. John M. Spratt (S.C.), ranking Democrat on the Budget Committee. The current depreciation schedule allows equal bonuses in 2002 through 2004. Democrats claim that encourages firms to delay new investments until 2004.
The plan also proposes $10 billion in one-time grants for what Democrats describe as urgent, unmet needs in homeland defense. These grants could be used to strengthen security at airports, seaports, rail tunnels and terminals. Within that amount, $3 billion is slated for "securing transit facilities."
The additional money will allow airports and other facilities to strengthen existing buildings or construct new facilities to house security personnel and equipment, says Rep. James L. Oberstar (Minn.), the senior Democrat on the Transportation and Infrastructure Committee.
Highway construction would receive a $5-billion infusion. In addition, states could defer for two years the 20% funding share they contribute to highway projects. That will allow projects to move forward that have been delayed, because funds were diverted for homeland security needs, adds Oberstar.
Other provisions include: an income tax rebate of up to $300 per person or $600 per working couple; a 26-week, retroactive extension of unemployment benefits for persons whose benefits expired on Dec. 28; and a one-year, one-time increase in the federal share of Medicaid payments.
With the GOP controlling the House and Senate and the White House, Pelosi admits Democrats will face an uphill battle trying to incorporate key elements of their package into compromise legislation. But she said she expects lawmakers from both parties to be able to find common ground.