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Democrats Divided Over Rebates for Wealthy Americans

Image has not been found. URL: /wp-content/uploads/2008/09/baucus1.jpgSen. Max Baucus (D-Mont.), WDCpix

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Illustration by: Matt Mahurin

A Senate panel’s plan to boost the economy with direct rebates to even the wealthiest Americans is moving forward this week. But the strategy has already raised the eyebrows of many well-placed Democrats, who contend that higher-income folks have no business receiving the benefit.

Senate Majority Leader Harry Reid (D-Nev.) said Tuesday that the proposal, introduced Monday by Senate Finance Chairman Max Baucus (D-Mont.), has caused many in the caucus to “feel that the gag reflex is coming upon everybody.”

Others were less graphic, but equally piqued. North Dakota Sen. Kent Conrad (D), chairman of the Budget Committee, and David Walker, the head of the nonpartisan Government Accountability Office, argued Tuesday that any rebate strategy must target those most likely to turn around and spend the cash quickly. Upper-income earners, they said, are hardly that group.

“Though it’s not to my advantage,” said Walker, the U.S Comptroller General, “I don’t believe that meets the definition of targeted.”

Under Baucus’ proposal, single Americans who claim at least $3,000 in qualifying income on their 2007 tax return will receive a $500 rebate. The rebate doubles for couples filing jointly, while families would receive an additional $300 for every child under age 17. Baucus says the plan would cost about $161 billion this year, and another $34 billion in 2009.

But in a significant departure from the $150 billion House proposal — finalized last week with the blessing of the Bush administration - the Senate’s strategy would grant rebates to even the wealthiest Americans.

The House bill, by contrast, would disqualify individuals making more than $75,000, or couples earning more than $150,000. The distinction prompted an outcry from Conrad, who wondered Tuesday how $1,000 more in the pocket of Bill Gates, Barry Bonds, or even himself would stimulate the economy.

“I mean, you know, we don’t need a check,” Conrad said of his family, “[and] wouldn’t spend it if we got it. So that doesn’t stimulate the economy … I think, at some point, we would become ridiculed if we start just sending checks, regardless of whether it has any stimulative effect.”

Baucus’ bill contains a number of items supported by Democrats but not included in the House proposal. Federal unemployment insurance, for example, would be extended for 13 weeks beyond the current 26. The Senate version would also benefit millions of seniors by allowing Social Security benefits to count toward the minimum income requirements, dictating who gets rebates. But it’s the absence of income caps that’s received much of the attention–and criticism.

“To take off the caps causes me to want to gag. OK?” Reid said. “But other than that, I like it.”

Reid said Baucus “heard from plenty of people in our caucus today,” but he gave no indication if the Montanan is willing to alter his stance on the issue.

Baucus’ office did not respond to requests for comment, but the Finance Committee plans to consider the bill Wednesday. If the panel fails to add the caps, Reid said, there would be an effort to do so on the Senate floor.

It’s not the first time Baucus has bucked his party on a high-profile issue. The moderate Democrat was a central supporter of the Bush administration’s successful 2003 push to install a prescription drug program under Medicare. More recently, he was the only Senate Democrat to reject efforts to grant Washington a congressional vote. He is also facing reelection this year in a state that went 59 percent for Bush in 2004.

As the Democrats bicker, the Republicans are watching for developments. On Tuesday, Senate Minority Leader Mitch McConnell (R-Ky.) declined to commit to one bill above the other. “The important thing here is to see if we can get it done quickly, [and] do it on a largely bipartisan basis,” McConnell said. “And the process for going forward is there are many different options, and I’m certainly not going to characterize my members’ views on various pieces of either package.”

Walker, for his part, offered a suggestion in the event the legislation is approved with the high-income rebates intact. Testifying before the Budget Committee, Walker told lawmakers that, based on the federal government’s future commitments - including those surrounding Medicare, Social Security and veterans’ benefits - Washington’s unfunded liability now totals about $53 trillion, including the current $9 trillion debt.

With that in mind, Walker proposed that any check delivered to America’s wealthiest families be accompanied by a bill for their share of the nation’s total fiscal burden - currently $175,000 for every man, woman and child in the country.

“That might get people’s attention,” Walker said.

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