WASHINGTON (Reuters) - Democratic leaders in the House of Representatives unveiled an $825 billion tax cut and spending bill on Thursday they hope will help President-elect Barack Obama reverse the steep decline in the U.S. economy.
The bill, which would add to an already massive $1.2 trillion budget deficit forecast for this year, would combine $550 billion in emergency spending initiatives with $275 billion in temporary tax benefits over the next two years.
The goal of the legislation, according to House Speaker Nancy Pelosi, a California Democrat, is to create and save up to 4 million jobs in an economy that has suffered through a recession for more than a year.
“We wanted to get the biggest bang for the buck of every dollar spent without having the package be so big that it’s weighed down” with unnecessary deficit-spending, Pelosi said.
Obama has called on Congress to act quickly or risk seeing the economy deteriorate further.
House Minority Leader John Boehner, an Ohio Republican, said the bill would call for “questionable new government spending on programs and projects, while providing less tax relief for middle-class families and small businesses” than Obama had proposed.
Pelosi acknowledged that the unveiling of the proposal was only a “first step” in what will be a month-long legislative push in Congress.
House Appropriations Committee Chairman David Obey, a Wisconsin Democrat who played a central role in developing the bill, warned $825 billion could “undershoot” what is needed.
“This is the largest effort by any legislative body on the planet ... to prevent an economic catastrophe,” Obey said, adding, “We may need to do more at a later date” because of the rapid deterioration of the U.S. economy, he said.
Next Wednesday, one day after Obama is sworn in as president, Obey’s committee plans to have a detailed review of the bill, giving Republicans an opportunity to offer changes.
The House Ways and Means Committee will oversee the tax provisions and a third panel will examine energy issues proposed in the bill.
One of the tax proposals aims to get cash flowing immediately to home builders and others hit hard by a housing-market bust. It would allow businesses to write off current losses against the past five years of taxes. Current law provides for a two-year window for the write-off.
But companies that have benefited from funds distributed under a separate $700 billion government bailout program would not be allowed to claim the enhanced tax break.
The proposal also includes other tax breaks for business investment and makes good on an Obama campaign pledge to give workers a refundable $500 tax credit and $1,000 per couple.
With the U.S. jobless rate climbing — it could exceed 9 percent by early next year according to some government analysts — the bill would extend unemployment benefits through 2009 and strengthen job training.
Also on the spending side, the legislation would commit hundreds of billions of dollars to projects including road and bridge rebuilding and aid to schools. It also invests in health information technology and would give $87 billion to help states with Medicaid health benefits for the poor.
In an attempt to soothe taxpayers, who might be suffering sticker-shock from the $700 billion financial industry bailout approved in October and the astronomical federal budget deficits being forecast, Democrats said none of the money would go for special-interest projects lawmakers regularly seek in spending bills, popularly known as “pork-barrel” spending.
Some of those projects are characterized as a waste of tax dollars. Democrats said there would be tight oversight of how the money is spent but with the hope that job-creating construction projects start quickly.
Tucked into the “American Recovery and Reinvestment Plan” is $650 million that would continue a program that helps consumers buy converter boxes so their televisions still work after February 17 when the switch is made to crisper digital signals from analog.
Additional reporting by Jeremy Pelofsky, editing by Vicki Allen