Image: Harry Reid, Richard Durbin, Max Baucus, Patty Murray
Dennis Cook  /  AP
Senate Majority Leader Harry Reid meets reporters on Capitol Hill on Thursday after Senate Democrats and Republicans reached agreement on an economic stimulus package. "We all have to acknowledge that the House bill has been improved significantly. ... We'll be back and do more things to help stimulate the economy," Reid said.
msnbc.com news services
updated 2/8/2008 8:16:03 AM ET 2008-02-08T13:16:03

Congress, facing the prospect of an election-year recession, passed an emergency plan Thursday that rushes rebates of $600 to $1,200 to most taxpayers and $300 checks to disabled veterans, the elderly and other low-income people. President Bush said on Friday he would sign the measure next week.

The Senate and House of Representatives on Thursday approved the measure, a series of tax rebates and business incentives aimed at staving off an election-year recession in the struggling U.S. economy.

“We are in a period of economic uncertainty and we’ve acted again,” Bush told a conservative conference in Washington. “I want to thank the members (of Congress) for passing a good piece of legislation, which I will sign into law next week.”

“This bill reflects our principles. It is robust, it is pro-growth, it stimulates business investment and it puts money into the hands of American consumers,” he added.

House passage by a 380-34 vote came a few hours after Senate leaders ended a drawn-out stalemate over the bill. The plan, which adds $168 billion to the deficit over two years, is intended to provide cash for people to spend and tax relief for businesses to make new investments — boosts for an economy battered by a housing downturn and credit crunch.

The Senate’s 81-16 vote capped more than a week of political maneuvering. The stalemate ended when majority Democrats dropped their demand that rescue proposal offer jobless benefits, heating aid for the poor and tax breaks for the home building and energy industries.

GOP senators refused to relent in their opposition to those ideas, but did agree to add $300 rebates for older people and disabled veterans to a $161 billion measure the House passed last month.

Rebate checks could begin arriving in May. The rebates would be based on 2007 tax returns, which are not due until April 15.

The legislation would rush rebates — $600 for individuals, $1,200 for couples — to most taxpayers and cut business taxes in hopes of reviving the economy. Individuals making up to $75,000 a year and couples earning up to $150,000 would get the full rebate, with those making more than that getting smaller checks.

People who paid no income taxes but earned at least $3,000 — including through Social Security or veterans’ disability benefits — would get a $300 rebate.

“We believe the stimulus, the way it is targeted, will put money into the hands of those who will spend it immediately, injecting demand into the economy and therefore creating jobs,” House Speaker Nancy Pelosi, D-Calif., told colleagues.

The measure also includes steps to boost the ailing housing market.

The turnaround in the Senate came after Democrats fell just one vote short Wednesday of overcoming a GOP filibuster and pressing ahead with their $205 billion plan.

Major Market Indices

Democrats decided on Thursday against insisting on their package. Instead, they agreed to speed the bipartisan measure, adding $168 billion to the deficit over two years, to Bush.

“It’s our responsibility to pass the strongest bill that we can, and so I think it’s tremendous what we’ll be able to accomplish,” said Majority Leader Harry Reid, D-Nev. “We had to finish this quickly.”

The retreat came after Pelosi sided with Republicans, including Senate Minority Leader Mitch McConnell of Kentucky. Pelosi urged the Senate to stop its infighting and pass the bill.

“There’s no reason for any more delay on this,” Pelosi said.

Thirty-three Republicans joined 46 Democrats and the Senate’s two independents to pass the measure. Sixteen Republican senators voted against the plan.

Reid defended his decision to try to pressure Republicans on the larger proposal by offering it as a take-it-or-leave-it proposition along with the rebates for older people and veterans. “I feel very strongly that we did the right thing,” Reid said.

Democrats said Republicans would pay a political price for their opposition. The more expensive proposal would have extended unemployment for 13 weeks for people whose benefits had run out; added $1 billion in heating aid for the poor; and provided tax breaks for the home-building, renewable energy and coal industries.

“If today (Republicans) are squirming because they voted ’no,’ that’s what democracy is all about,” said New York Sen. Charles Schumer, the head of the Senate Democratic campaign committee. “The political chips will fall where they may.”

But Democratic Sen. Max Baucus of Montana, chairman of the Senate Finance Committee, said: “Discretion is the better part of valor. The best thing for us to do is declare a big victory that we’ve achieved, namely getting the rebate checks to 20 million seniors and 250,000 disabled veterans.”

The measure moved through Congress with remarkable speed amid a series of deflating economic reports. Some Republicans, however, expressed reservations that the rebate checks would help much. Other lawmakers worried about expanding the budget deficit.

“We have to remember that every dollar being spent on the stimulus package is being borrowed from our children. And our children’s children,” said Sen. Judd Gregg, R-N.H., who voted against the bill.

The Associated Press and Reuters contributed to this report.

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