Democrats to look at tax cuts, rebates

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House Democratic leaders yesterday said they were open to an economic-stimulus package with tax cuts for small businesses and rebate checks to U.S. consumers that are not "paid for" with tax increases, moves likely to win Republican support.

Leaders on both sides of the aisle were dropping the fiery partisan rhetoric that last year stifled the Democrat-led Congress, instead promising to work together on a quick fix to jump-start the nation"s sluggish economy.

"The conversation between Congress and the administration will continue as we develop an economic-stimulus plan that is timely, targeted and temporary and one that restores confidence — consumer confidence and confidence in the market," House Speaker Nancy Pelosi, California Democrat, said after a teleconference with Treasury Secretary Henry M. Paulson Jr.

House Republican leaders credited Mrs. Pelosi and Senate Majority Leader Harry Reid, Nevada Democrat, with seeking common ground for an economic boost.

The Republicans returned the favor by abandoning their demand that the economic fix also extend President Bush's 2001 and 2003 tax cuts that expire in 2010 — a major party priority opposed by Democrats.

But they insisted that tax increases of any kind be taken off the table.

"This includes tax increases disguised as 'offsets' in order to comply with Congress' [pay-as-you-go] rule, as well as pork-barrel spending that may be attached to the package in the name of 'emergency spending,' " said two top House Republicans, Minority Leader John A. Boehner of Ohio and Minority Whip Roy Blunt of Missouri, in a letter to the speaker.

Mrs. Pelosi, who Monday talked with Federal Reserve Chairman Ben S. Bernanke about an economic-stimulus plan, has been reluctant to confirm details of the package.

It is expected to include a $300 to $600 rebate check for each U.S. household, which has support from Democrats and Republicans, provided it doesn't trigger tax increases.

Democrats also favor government spending programs for roads, bridges and other infrastructure projects.

Other proposals, which seek to answer some of the early criticism from Republicans, have started to circulate.

Rep. Chris Van Hollen of Maryland, chairman of the Democratic Congressional Campaign Committee, said they are considering "targeted and temporary tax cuts" for small businesses and investments in small businesses.

House Majority Whip James E. Clyburn said he supported a plan to designate the rebate checks and other proposed payouts as emergency measures that would not be subject to pay-go rules, which requires new spending to be offset by other tax increases in the budget.

"We find ourselves in an emergency," the South Carolina Democrat said. "Pay-go does not apply when there is an emergency."

The Congressional Budget Office (CBO) says the most effective way to stimulate the economy is to provide money — either through tax cuts or directs payments such as food stamps — to people most likely to spend it quickly.

The nonpartisan CBO, in a report released yesterday, added that economic-stimulus ideas favored by Democrats, including an extension of unemployment benefits and a temporary increase in food stamps, also would help.

But Republicans proposals such as extending Mr. Bush's tax cuts, cutting corporate tax rates and giving businesses new incentives to invest, however, may be less cost-effective, the CBO said.