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In Monday’s debate, the Democratic candidates slammed Bush’s economic stimulus proposal because it focused on rebates for "tax payers" and business tax breaks, which meant that 50 million low income retirees and other non tax payers would not receive any relief. But with Washington now in near panic over the prospects of a recession, several of the Democratic approaches for filling this gap may now be included. From the Washington Post’s Peter Baker and Jonathan Weisman:

In an important concession to Democrats, Treasury Secretary Henry M. Paulson Jr. signaled that he is open to including tax breaks, even for those who do not pay income taxes.

Paulson plans to open formal talks on the details of the package this morning, and Senate leaders agreed to defer to House Speaker Nancy Pelosi (D-Calif.) and House Minority Leader John A. Boehner (R-Ohio) as chief negotiators. But officials said they were close to the framework of a roughly $145 billion plan: about two-thirds of the money going for tax breaks for individuals, plus extended unemployment and food stamp benefits; and the other third for business tax breaks. Individuals would get rebates of as much as $800, and married couples would receive as much as $1,600.

Paulson had said last Friday that the President wanted "relief for those who are paying taxes," but after watching the financial markets plunge around the world, the Administration changed it’s tune:

But Paulson reversed that formulation yesterday, saying in a speech to the U.S. Chamber of Commerce that "the package must reach a large number of citizens." By saying "citizens" instead of "taxpayers," the secretary opened the door to ideas advanced by Democrats to extend the short-term tax relief to those who do not pay income taxes. Among ideas under consideration, officials said, would be making the tax cut refundable, increasing the earned-income tax credit that goes to low-income workers, or increasing the child tax credit.

Administration officials said privately that, despite philosophical concerns, they would be open as well to extending unemployment benefits and food stamps, as Democrats want to do. "If the pots don’t become a large pot, I think a deal can be done," said one administration official, speaking on the condition of anonymity to discuss negotiating strategy.

That leaves the question of new spending for public works projects — infrastructure development — an idea straight out of the New Deal that some Democrats have been pushing to include but Republicans oppose. Now even these options may be on the table:

Pelosi originally wanted to address infrastructure spending in a separate, follow-on measure to avoid complicating a bipartisan stimulus package, but Reid has pushed her to fight for at least some such projects because he argued that two bills would be difficult to pass in the narrowly divided Senate, congressional aides said.

Many economists, including Congressional Budget Office Director Peter R. Orszag, have suggested such spending would have little impact because it takes too long to allocate funds, solicit bids for construction contracts and begin the work. Democrats are coalescing around a modest pot of money only for highway-resurfacing projects, which they say are needed, are labor-intensive and are quicker to get started.

I wonder whether the Democrats know how to play poker or politics, and I’m concerned about assuming the downturn will not last very long. (See Krugman.) If we’re still in recession next year, a lot more public works spending initiated this year would be timely then and is a worthwhile investment in any event. Update: Nobel economist Joseph Stiglitz lays out the rationale in this NYT op ed. (h/t Bilbo)

Still, they are shaping the debate, despite media assertions that the President is in charge. CNN’s Suzanne Malveau told Lou Dobbs last night that only the President can enact a stimulus package, Article I of the Constitution notwithstanding. Apparently she’d read the NYT article by Sheryl Gaye Stolberg describing Bush proposals without mentioning Congressional Democrats had been working on this for weeks. But as Froomkin noted yesterday, the markets have "voted ‘no’ on Bush," and it’s mostly Democratic proposals being considered to bail out the Republicans’ economic mess.

Where’s the "party of ideas"? McCain told us he doesn’t understand economics,so why not bring back Greenspan; Huckabee wants to disband the IRS and enforce NAFTA; Giuiliani wants to simplify the tax forms; and wealthy private businessman Romney thinks we should extend Bush’s tax cuts for the wealthy and cut corporate and individual tax rates — but no immediate low income relief. I can’t wait for November.

Related posts:

  1. Biden to Smack Boehner Around on Stimulus
  2. NYT Can’t Recall that Republicans Who Demand “Where Are the Jobs?” All Voted Against the Stimulus
  3. White House Calls Kyl’s Bluff on Canceling Stimulus, Republicans Whine About It
  4. Boehner Enlists Bloodhound to Look for Stimulus Jobs, Forgets They’re in His Home State
  5. Warren Buffett: Economy Needs Another Stimulus to Get It Up