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 House Speaker Nancy Pelosi agreed to drop increases in food stamp and unemployment benefits during the Wednesday meeting in exchange for gaining a rebates of at least $300 for each person earning a paycheck, including low-income earners who make too little to pay income taxes.
Families with children would receive an additional $300 per child, subject to an overall cap of perhaps $1,200, according to a senior House aide who outlined the deal on condition of anonymity in advance of formal adoption of the whole package.
Pelosi, D-Calif., and House Minority Leader John Boehner, R-Ohio, had yet to reach agreement on a package of tax breaks for businesses after estimates showed a tentative business tax agreement could exceed $70 billion, far more than had been expected, the aide and a Democratic lobbyist said.
Pelosi and Boehner appeared optimistic as they left their third extended negotiating session of the day with Treasury Secretary Henry Paulson. "We'll have more to say tomorrow," Boehner said. "We're hopeful."
However, Pelosi's spokesman said another negotiating session tentatively scheduled for Thursday morning was postponed because the speaker first needed to brief fellow Democrats on the emerging but plan.
Democratic aides said greater GOP flexibility over giving relief to poor families with children
-- who would not have been eligible under President Bush's original tax rebate proposal
-- was the catalyst that moved the talks forward.
Asked whether agreement was near, Pelosi said, "We're moving toward that, but all the issues are not resolved."
The business tax portion still being negotiated would give businesses incentives to invest in plants and equipment, give small businesses more generous expensing rules and allow businesses suffering losses now to reclaim taxes previously paid. The last item on spreading operating losses was proving to be unexpectedly expensive.
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 Pelosi pressed to make sure tax relief would find its way into the hands of lower-income earners while Boehner pushed to include upper middle-class couples with incomes of up to $130,000 or so, according to congressional aides.
Bush backs larger rebates of $800-$1,600, but his plan would have left out 30 million working households who earn paychecks but don't make enough to pay income tax, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center. An additional 19 million households would have received only partial rebates under Bush's initial proposal.
Rep. Barney Frank, D-Mass., said negotiators also were near an agreement on an overhaul of the Federal Housing Administration that would make it easier for thousands of homeowners with ballooning interest rates to refinance into federally insured loans. That measure might advance separately of the tax relief package, however.
Both sides agreed to allow Fannie Mae and Freddie Mac -- government-sponsored companies that are the two biggest U.S. financers and guarantors of home loans
-- to buy loans much larger than the current $417,000 limit, aides and lobbyists said. Frank said that lending cap might reach as high as $700,000 in areas with the highest home prices.
Pelosi's decision to drop expanding unemployment payments and more money for food stamps
-- which many lawmakers had assumed would be included in the package -- could prove very controversial with Democratic constituencies such as unions, who were already stung by a decision to deny states more money for their Medicaid programs.
Many Democrats had pressed to extend unemployment benefits for people whose 26 weeks of benefits have run out, but Republicans resisted.
[Associated
Press; By ANDREW TAYLOR]
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