The US economic problems stemmed from a collapse of housing prices, escalating oil prices and tight credit related to the housing disaster. The domestic and foreign turmoil that followed made the economy replace the war in Iraq as a chief worry of US voters as the presidential nomination campaign heats up.

As the possibility of economic recession became more plausible, lawmakers eagerly jumped at a chance to ward off the financial collapse threatened during an election year.

Tax rebates
The package passed on Thursday features tax rebates of US$600 to US$1,200 to most tax filers within six months in the hope they will spend the money quickly and jolt the ailing economy to life.

Businesses would get US$50 billion in incentives to invest in new plants and equipment.

The one-time tax rebates are at the centre of a hard-won agreement to pump about US$150 billion into the economy this year as a way to stave off what would be the first recession since 2001, President George W Bush's first year in office. House Speaker Nancy Pelosi, the Democrat who runs the House of Representatives, Republican leader John Boehner and Treasury Secretary Henry Paulson worked out details in negotiations that stretched into Wednesday night at the Capitol.

About two-thirds of the tax relief would go out in rebate checks to 117 million families beginning in May.

Individual taxpayers would get up to US$600 in rebates, working couples US$1,200, and those with children an additional US$300 per child under the agreement.

In a key concession to Democrats, 35 million families who make at least US$3,000 but do not pay taxes would get US$300 rebates.

Package will lead to consumer spending
'This package will lead to higher consumer spending and increased business investment,' Mr Bush said in hailing the agreement.

The bill will go straight to the House floor next week and on to the Senate, where some Democrats hope to add elements such as extending unemployment benefits for workers whose benefits have run out.

Indeed, many Democrats, such as House Ways and Means Committee Chairman Charles Rangel, and Sen Edward Kennedy, the liberal lion of the Senate, were deeply unhappy that Ms Pelosi agreed to jettison that proposal in late-stage talks, along with plans to increase food stamp payments.

'I do not understand, and cannot accept, the resistance of President Bush and Republican leaders to including an extension of unemployment benefits for those who are without work through no fault of their own,' Mr Rangel said.

The administration signalled it is unlikely to welcome efforts to broaden the measure, and pressure was mounting in the Senate to accept the hard-won deal.

'The American people are not going to have a lot of patience for taking time,' Mr Paulson said.

If the Senate gives quick approval, the first rebate payments could begin going out in May and most people could have them by July, he said.

Economy on edge of recession
It has become increasingly clear that the economy is teetering on the edge of recession, if it has not already crossed that line. The crisis in subprime adjustable home loans, which became commonplace during a booming housing market a few years ago, has hit hard at many lending institutions, cramping credit for almost everyone else.

Economic growth has all but disappeared, companies are reporting big losses and Wall Street had been tumbling day after day, even after emergency Federal Reserve rate-cutting, until Wednesday's hopeful talk about the stimulus deal. The Dow Jones industrial average was up more than 100 points on Thursday after soaring almost 300 the day before.

In addition to worries openly expressed by lawmakers, members of Congress are not eager to run for re-election this year with voters fearful of losing jobs in a recession.

For businesses, the stimulus measure would allow them immediate tax write-offs for 50 per cent of the purchase price of factories and other capital equipment and permit small businesses to write off additional purchases of equipment. A provision to allow businesses suffering losses now to reclaim taxes previously paid was dropped in end-stage talks.

In exchange for the items Speaker Pelosi agreed to drop, she gained the rebates of at least US$300 for almost everyone earning a paycheck, including those who do not make enough to pay income taxes.

More to come if package does not help
'I can't say that I'm totally pleased with the package, but I do know that it will help stimulate the economy. But if it does not, then there will be more to come,' Ms Pelosi said. She said House Democrats may act on other proposals to stimulate the economy, particularly if it should worsen in coming weeks.

Mr Boehner said the agreement 'was not easy for the two of us and our respective caucuses.' 'You know, many Americans believe that Washington is broken,' the Ohio Republican said. 'But I think this agreement and I hope that this agreement will show the American people that we can fix it.'

Mr Paulson said he would work with the House and Senate to enact the package and declared that 'speed is of the essence.' He cautioned that 'the work is far from over.' Senate Majority Leader Harry Reid said his goal is to send the package to the White House by Feb 15 for Mr Bush's signature, but he noted the Senate probably would try to add more spending.

Bush had supported larger rebates of US$800 to US $1,600 , but his plan would have left out 30 million working households of people who earn paychecks but not 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.

Mortgage crisis
To address the mortgage crisis, the package raises the limit on Federal Housing Administration loans from US$362,790 to as high as US$729,750 in expensive areas, allowing more subprime mortgage holders to refinance into federally insured loans.

To widen the availability of mortgages across the country, it also provides a one-year boost to the cap on loans that Fannie Mae and Freddie Mac can buy, from US$417,000 up to US$729,750 in high-cost markets. -- AP