Sunday 22 April 2018

The $100bn sweeteners that finally swung deal

Tim Reid in Washington

The fate of America's $700bn financial rescue package, and the health of the global economy, hinged on a 39c tax break for an Oregon firm which makes children's wooden arrows -- although the Alaskan fishermen who were affected by the 1989 Exxon Valdez disaster, and who gained $223m (€162m) in tax breaks when the bill was passed, might also have unwittingly played a pivotal role.

As the White House and leaders from both parties conducted a final push to convert enough rebels to salvage the rescue plan from its defeat in the House on Monday, an array of 'pork barrel' projects were inserted to soften up waverers.

They were aimed at peeling away a handful of naysayers with the promise that if they voted yes this time, their pet projects would see the light of day. More importantly, the sweeteners were intended to gain the support of ordinary Americans on Main Street who saw the bill as a bailout of Wall Street.

Scramble

It was an extraordinary sub-plot in the scramble to save the US financial sector from collapse. Inserted into the modified bill by two Oregon senators on Wednesday night was a provision repealing a 39c excise tax on children's wooden arrows, which would save Rose City Archery, a company in Myrtle Point, Oregon, which makes the toys. Three House members from the state voted against the bill on Monday, but the new clause was designed to change their minds.

Also in the revised bill was $128m (€93m) of tax relief for the manufacturers of car racing tracks, aimed at congressmen in Nascar states, such as Virginia and North Carolina.

A provision to give $10m (€7.2m) in tax breaks to small television and film producers could have converted a congressman from Los Angeles. The help for Alaskan fishermen was aimed at swaying Don Young, a Republican from the state.

Republican and Democratic leaders had been cautiously optimistic the amended bill would pass the House, as it was stuffed with more than $100bn (€72.5bn) worth of tax cuts to attract Republicans.

Perhaps more importantly, it headed for a re-vote amid a growing realisation among voters and congressmen that the plan was not simply a Wall Street bailout, but is urgently needed to avoid a disintegration of the US economy. The revised bill, which started life nearly two weeks ago as a three-page proposal from Henry Paulson, the US Treasury Secretary, now stretches to over 450 pages.

It arrived in the House with renewed momentum yesterday after a huge bipartisan majority passed it in the Senate by 74 to 25 on Wednesday.

The modified plan not only contained big tax-cut provisions, but also an increase of insurance for deposit accounts from $100,000 (€72,500) to $250,000 (€181,200).

It was aimed primarily at attracting enough of the 133 Republicans who rejected the bill on Monday to change course. Another provision aimed at the Democratic African-American caucus -- most of whom voted against the plan on Monday -- was also inserted: a property tax deduction they have been demanding. (© The Times, London)

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