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US Congress approves US$787b stimulus bill

THE US Congress, handing President Barack Obama a major legislative victory, yesterday approved a US$787 billion stimulus bill that aims to rush emergency government spending and tax cuts to a nation in the grip of a severe recession.

The Senate cast the final vote, 60-38, hours after the House of Representatives passed an identical bill, 246-183. The action capped weeks of arguing over how Congress could best stimulate an economy suffering a rising jobless rate of 7.6 percent and a banking crisis that has nearly frozen lending.

The Senate voting was held open for several hours to await Ohio Democratic Senator Sherrod Brown's arrival in Washington to cast the 60th vote needed for passage. The White House arranged for a government plane to fly him back from services for his late mother in Ohio.

Obama is expected to sign the bill into law soon, fulfilling a pledge to try to reverse the economic slide with a recipe that includes middle-class tax cuts, money for construction projects, help for the poor and unemployed and new investments in alternative energy.

Democrats hope to save or create 3.5 million jobs.

Republicans argued unsuccessfully for less government spending and more tax cuts.

The final plan is split into 36 percent for tax cuts and 64 percent in spending and other provisions. That was close to the 40/60 split Obama had sought in his effort to jolt the economy, which he has warned could become a "catastrophe" without rapid government intervention.

The massive new government spending will add significantly to federal budget deficits already shattering records. According to the nonpartisan Congressional Budget Office, the stimulus bill will increase next year's deficit alone by nearly US$400 billion.

The White House said it would take about a month for the money to start flowing. A primary concern for economists is that the stimulus will come too late to do much good in 2009, when many forecasters think full-year output will contract.

The final package includes about US$500 billion in spending and money for social programs like the Medicaid health insurance program for the poor. It has about US$287 billion in tax cuts that include small tax incentives to spur home and automobile sales as well as business tax deductions.

Individuals would get a refundable tax credit championed by Obama of up to US$400 per individual and US$800 for couples in 2009 and 2010. It is phased out for individuals with adjusted incomes of over US$75,000 and couples with incomes over US$150,000.

The measure includes almost US$54 billion to help states with their budget deficits and to modernize schools, US$27.5 billion for highway projects, US$8.4 billion for public transportation and US$9.3 billion for Amtrak and high-speed rail service.

The final agreement also included limits on compensation for senior executives of companies receiving government aid from a US$700 billion financial bailout, including restrictions on bonuses.


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