WASHINGTON, May 29, (Agencies): The House of Representatives on Friday passed a scaled-back economic-stimulus package of tax breaks and safety net spending that would raise taxes on fund managers and multinational corporations.
Democrats say the bill will help bring down the 9.9 percent unemployment rate, but it comes too late for hundreds of thousands of Americans who will see their jobless benefits expire next week.
The bill would extend benefits through November, but the Senate left town for a week-long break without taking action.
Democrats aim to restore the payments when they return the week of June 7. But the unemployed also face a permanent loss of health-care subsidies, which were stripped out of the bill to win the support of cost-conscious moderates.
President Barack Obama praised the bill’s passage as “one important step forward in getting American families the help they need.” He urged Congress to restore the healthcare subsidies and act on other measures that would boost lending to small businesses and avert layoffs of teachers and other public employees.
Congressional wrangling has delayed jobless benefits at least four times in the past year. Democrats say they will restore the benefits when they return in early June.
The bill passed 215 to 204, largely along party lines. At least 33 Democrats voted against it, and one Republican voted for it.
The delay until a Senate vote also gives Wall Street fund managers more time to try to weaken a provision to tax their earnings at regular income rates rather than lower capital-gains rates.
In a separate bill, the House voted 245 to 171 to postpone a scheduled pay cut for doctors under the Medicare health-insurance program, a delay that would cost $23 billion.
With November’s congressional elections looming, Democrats who control Congress face conflicting pressures to reduce the 9.9 percent unemployment rate and close the budget deficit, which hit a record $1.4 trillion last year.
Priority
At the beginning of the year, Democrats said job creation would be their top priority, but they have shown little appetite for ambitious measures such as last year’s $863 billion stimulus package.
Republican Representative Mike Pence called the bill “another last-minute, patched-up-together, hodgepodge to say they’re working on jobs.” He said broad tax cuts would do a better job of stimulating the economy.
Democratic leaders trimmed the bill several times to satisfy fiscal hawks in their own ranks who balked at its cost. They stripped out $30 billion in health-care subsidies for unemployed people and aid to cash-strapped states, and spun off the doctors’ money into a separate vote.
“This is a real victory for the moderates,” said Democratic Representative Dutch Ruppersberger. “Our country is weakened by the deficit.”
Combined, the two bills would add $54 billion to the deficit over 10 years — a sharp drop from the original version that would have increased it by $134 billion.
The bill would extend unemployment benefits through the end of November. It includes other job-creation measures, such as construction subsidies and a summer jobs program for students.
The bill also renews a grab bag of tax breaks that expired at the end of 2009, such as a research-and-development credit for businesses.
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WASHINGTON: The US Federal Reserve said Friday it has scheduled tests of one of its tools likely to be used to drain massive amounts of money injected into the system during the financial crisis.
The central bank said in a statement that three small-value auctions of term deposits would be made over the next two months through its Term Deposit Facility (TDF).
The facility could give banks an extra incentive to keep their money at the Fed through interest-bearing deposits instead of lending it out to companies. The Fed pumped about 1.5 trillion dollars into the financial system beginning in 2008 and cut interest rates to virtually zero percent in a bid to jolt the economy from the worst recession in decades.
As the economic grows, the central bank needs to suck out any excess money to keep inflation at bay. The Fed described the auctions as “a matter of prudent planning and have no implications for the near-term conduct of monetary policy.”
The first auction will be for one billion dollars of 14-day term deposits on June 14, followed by an auction of 28-day deposits on June 28 and another of 84-day deposits on July 12. The sizes of the second and third auctions were not specified.
Two further tests were planned for the coming months.
The maximum interest rate for the deposits will be 0.75 percent, slightly higher than the zero to 0.25 percent target range charged on overnight loans between banks.
Fed chief Ben Bernanke has often emphasized that the central bank has an “exit” strategy for the recovery but is not yet ready to shift course.