Democrats Push for Another Huge Stimulus: $825 Billion Plan Includes Business Tax Breaks; Senate Releases Cash For Bank Rescues

From The Wall Street Journal:

WASHINGTON — House Democrats Thursday rolled out the details of an $825 billion economic stimulus package to combat what they called “a crisis not seen since the Great Depression,” but its immediate economic impact is unclear and the plan faces hurdles before becoming law.

Details of the two-year package, which calls for $550 billion in new spending and $275 billion in tax relief, will likely change as the bill works its way through Congress. But the document provides the first blueprint of how President-elect Barack Obama and congressional Democrats plan to fight the historic economic downturn, which has already wiped out 2.6 million jobs.

Businesses would get “bonus” depreciation for investing in new plants and equipment. They also would be able to write off current losses against the past five years of tax returns. Current tax rules allow losses to be carried back only two years. But companies receiving money from the financial-system bailout program are ineligible. That’s a loss for some of the nation’s big banks and troubled auto makers General Motors Corp. and Chrysler LLC.

The stimulus plan was released hours before the Senate backed Mr. Obama on another key measure by approving the Treasury’s call for the release of the second half of the $700 billion financial-system rescue package. That program is being replenished as Bank of America Corp. was near an agreement with U.S. officials that would provide it with $15 billion to $20 billion of fresh capital.

The plan would be one of the largest single government expenditures in U.S. history, and would be equivalent to about 3% of gross domestic product over two years. The proposal is $125 billion bigger than the controversial bailout for the financial-services industry. It outweighs in dollar terms all other nations’ stimulus plans, though China’s $600 billion stimulus is a larger share of its economy. [Read More]