Congressional Democrats and Republicans and the Bush administration reached a tentative deal Thursday on tax rebates for individuals and tax cuts for businesses, to jolt the slumping economy.
The U.S. economic problems - stemming from a collapse of housing prices, rising oil prices and tight credit - have caused turmoil in U.S. and international financial markets. The economy has replaced Iraq as a chief concern of U.S. voters as the presidential nomination campaign heats up.
Congressional officials close to the negotiations said the leader of the House of Representatives, Speaker Nancy Pelosi, and Republican leader John Boehner reached agreement in principle in a telephone call Thursday morning.
Pelosi, a Democrat, agreed to drop increases in food stamp and unemployment benefits during a Wednesday meeting in exchange for gaining the rebates of at least $300 for almost everyone earning a paycheck, including those who make too little to pay income taxes.
"I can't say that I'm totally pleased with the package, but I do know that it will help stimulate the economy. But if it does not, then there will be more to come," Pelosi said.
Boehner said the agreement "was not easy for the two of us and our respective caucuses." He added, "The two caucuses have to come together and to work in a bipartisan way and to reach a compromise that I think is in the best interest of the American people."
The emerging package was already drawing fire from liberal activists and labor unions upset that proposals to extend unemployment insurance and boost food stamps were dropped; likewise, conservative Republicans were restless over tax rebates being given to those too poor to have paid taxes.
Treasury Secretary Henry Paulson said he would work with the House and Senate to enact the package as soon as possible because "speed is of the essence."
Paulson said that checks could start going out within 10 weeks of the bill being enacted.
President Bush hailed the deal with as "an effective, robust and temporary set of incentives" that will boost the economy.
"This package has the right set of polices and the right size," he said. "It will lead to higher consumer spending and business investment this year."
While proclaiming that the "economy is strong and it is dynamic and it is resilient," he urged urged the House and Senate to enact the agreement as soon as possible.
Agreement on the emergency package was reached after negotiators on all sides made significant concessions at a late-night bargaining session.
Pelosi agreed to drop increases in food stamp and unemployment benefits during the Wednesday meeting in exchange for gaining rebates of at least $300 for almost everyone earning a paycheck, including low-income earners who make too little to pay income taxes.
Many Democrats had pressed to extend unemployment benefits for people whose 26 weeks of benefits have run out, but Republicans resisted.
Senate Majority Leader Harry Reid of Nevada issued a statement praising the agreement, and said that the Senate Finance Committee will review a markup of stimulus proposals next week.
But he also suggested that the House agreement could be "improved" with additional funds for other initiatives, such as extended unemployment benefits, nutrition assistance, state relief and infrastructure investment.
Under the House agreement, Families with children would receive an additional $300 per child, subject to an overall cap of perhaps $1,200, according to a senior House aide who outlined the deal on condition of anonymity in advance of formal adoption of the whole package.
Taxpayers who make more than $75,000 dollars (or $150,000 for couples filing jointly) won't get the full $600-per-person.
The rebate will be phased-out, reduced by $30 for every additional $1,000 dollars of income.
So, according to CBS News correspondent Dan Raviv, for single-filers above the $95,000 income level, there'll be NO check in the mail.
"I think this is a good big first step, I think it's the right step," Mark Zandi, chief economist at Moody's Economy.com, told CBS News. "I think for many hard-pressed households, a few hundred dollars in their checking account is going to make a big difference for them."
"The economy is struggling - it needs all the help it can get."
Democratic aides said greater Republican flexibility over giving relief to poor families with children - who would not have been eligible under President George W. Bush's original tax rebate proposal - was the catalyst that moved the talks forward.
Asked whether agreement was near, Pelosi said, "We're moving toward that, but all the issues are not resolved."
Sen. Max Baucus, D-Mont., scheduled a meeting of the Senate Finance Committee for next week to discuss the tentative package.
"The Senate will want to speak, as well," Baucus said, adding that he and Sen. Charles Grassley of Iowa, the panel's senior Republican, had "agreed to work together, move quickly, and mark up economic stimulus legislation next week."
The cost of the final business tax break package was less certain. The two leaders agreed to allow businesses to immediately write off 50 percent of purchases of plants and other capital equipment and to permit small businesses to write off additional purchases of equipment. It appeared that a provision to allow businesses suffering losses now to reclaim taxes previously paid might be dropped to reduce the cost of the business package.
To address the mortgage crisis, the package also allows Fannie Mae and Freddie Mac - government-sponsored companies that are the two biggest U.S. financers and guarantors of home loans - to buy home mortgages much larger than the current $417,000 limit. Rep. Barney Frank, D-Mass., and chairman of the House Financial Services Committee, said that lending cap might reach as high as $700,000 in areas with the highest home prices.
Pelosi pressed to make sure tax relief would find its way into the hands of lower-income earners while Boehner pushed to include upper middle-class couples with incomes of up to $130,000 or so, according to congressional aides.
Mr. Bush backed larger rebates of $800-$1,600, but his plan would have left out 30 million working households who earn paychecks but do not make enough to pay income tax, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center.
An additional 19 million households would have received only partial rebates under Mr. Bush's initial proposal.