With hundreds of billions in stimulus spending up for grabs shortly after the holidays, Congress is being deluged with wish lists for tax breaks for specific industries.

Business lobbying groups ranging from carpet and rug dealers to hotels to biotech companies all want to make sure they do not get left out of the bounty. They are making their voices heard with lawmakers and members of the incoming administration of President-elect Barack Obama.

Biden, joined by Summers, pledged not to back earmarks in the stimulus. (Associated Press)

The size of the package, which could reach as high as $1 trillion, and the lack of details on its contents have led to an unusual profusion of lobbying activity.

“The most staggering thing to us about this stimulus is that it’s a big number without any definition,” said Steve Ellis, vice president of the spending watchdog group Taxpayers for Common Sense. “When you have that lack of definition, it brings a large number of lobbyists to the table to try to fill in the blanks.”

Vice President-elect Joe Biden told reporters Tuesday that the Obama administration will not support “earmarks” in the package. While an earmark is usually considered to be a lawmaker’s pet project, Biden didn’t define what he meant.

“There will be strict accountability here. And there also will be no Christmas tree, notwithstanding the season,” Biden said, before a meeting with Obama economic advisers.

Furniture dealers and rug and carpet retailers want Congress to provide consumers with a $500 to $1,000 refundable tax credit they can use to buy home furnishings. The credit would be available only to those with incomes of $50,000 or less, but higher-income families would be able to deduct 10% of home furnishing costs, according to a one-page industry proposal.

Such a tax credit “fits conceptually within the Obama economic stimulus plan and the Obama economic philosophy of strengthening the economy from the bottom up,” the industry paper says.

Biotech firms, which typically face losses in their early years because of the intense research needed to bring a product to market, are looking for additional research subsidies through the tax code.

Biotech groups have proposed a refund for net operating losses, essentially giving them cash upfront if the firms agree to forgo the larger tax benefit to which they would eventually be entitled. That benefit could be limited to smaller firms and come with a dollar cap, according to an industry white paper.

Meanwhile, hoteliers want an enhanced tax credit for hiring individuals that have been receiving unemployment benefits.

The Work Opportunity Tax Credit, now used widely by hotels and restaurants, offsets 40% of the first year’s wages — up to $6,000 — of certain employees, including families eligible for welfare assistance, ex-felons, and youths living in empowerment zones. The hotel industry wants to add individuals who are receiving unemployment benefits, or who have exhausted those benefits.

Since many companies are not profitable in the slumping economy, proposals to make tax credits refundable are particularly popular. Wind and solar energy groups are pressing for renewable energy tax credits to be made refundable.

In addition to narrowly targeted provisions, large business groups are lobbying for tax breaks that would benefit firms across sectors.

Leading proposals include extending the period businesses are able to carry back net operating losses, from two years to five years; renewal of one-year “bonus” depreciation benefits, which allow companies to write off 50% of new equipment costs in the year that equipment is purchased; and a tax holiday for offshore income that would allow pharmaceutical, high-tech and other manufacturing firms to bring profits back to the U.S. at a reduced rate.

Obama administration officials are expected to send their stimulus proposal to Congress soon. Congressional leaders have said they want to pass legislation before Jan. 20, the day Obama will take office.

Many details of the package are yet to be decided, including how much of it will go toward individuals, how much to businesses through the tax code, and how much through direct appropriation for infrastructure spending, state aid, and other priorities.

Senate Finance Committee Chairman Max Baucus (D., Mont.) this month said he believes business tax relief in the bill could total as much as $350 billion. –Martin Vaughan

For U.S. consumers, 2009 is likely to be the year of saving, rather than spending.

Although some burdens, such as gasoline prices, have lightened considerably, the cons for the household sector still outweigh the pros. That’s why economists are downbeat on overall economic activity in 2009. A full-fledged recovery will depend on a resurgent consumer, who even after the recent pullback still accounts for 71% of all spending.

The biggest headwind for consumers is, not surprisingly, the weakening labor market.

It isn’t just the loss of 1.9 million jobs so far in 2008; it’s the job jitters triggered by those layoffs. If consumers worry they may be laid off, they will spend less whether or not their fears turn into reality. But less spending weakens the economy and job markets further.

Mending the job markets will be pre-eminent to turning around the economy. That’s why President-elect Barack Obama has upped the ante in his stimulus package, now promising to create three million jobs, instead of 2.5 million.

But an offshoot of the weak labor market — wage freezes, benefit cuts and smaller pay raises — also will hamper consumers.

The Conference Board reported last week that since the credit markets have gone into the tank, businesses have scaled back on their 2009 salary plans.

When the board surveyed companies in April and May, pay increases of 2.86% were planned for hourly nonunion workers; executive pay raises were set at 3%. But the board’s survey in October showed the raises were lowered to 2.5% for hourly workers and 2.8% for executives.

Financial blog Calculated Risk posted a listing Tuesday of media reports of salary freezes, ranging from energy group Duke Energy Corp. and tech services group Unisys Corp. to city workers in San Francisco and teachers in South Carolina.

Luckily for consumers, their purchasing power should improve as prices fall or increase at slower rates.

The plunge in energy prices is the biggest plus going for consumers right now.

Gasoline prices are down about $2 per gallon since the peak in July. Joseph LaVorgna of Deutsche Bank estimates that every $1 drop in gasoline adds about $100 billion to household cash flow — meaning households have an extra $200 billion to spend on items besides gasoline. That amount is bigger than the rebate checks sent out earlier in 2008.

In addition, heating-oil and natural-gas prices are down since the summer. So the coming winter should prove to be less onerous than was feared when crude oil shot past $140 per barrel.

The holiday shopping season has also brought a ton of bargains for consumers. Although door-busters and 20%-off coupons are the kiss of death for retail profits, consumers looking for flat-screen television sets, cashmere sweaters, or toys, are benefiting greatly.

Finally, there are trends that cut both ways across the consumer sector.

Extremely low interest rates, for instance, are great for borrowers. Homeowners in good financial shape and with equity in their homes have rushed to refinance their mortgages now that rates have fallen close to 5% for a 30-year loan.

But low rates are a drag for savers. Data from the Federal Reserve show that households — spooked by the stock markets — have boosted their holdings of interest-bearing accounts by about $250 billion so far this year. But interest income has fallen by $25 billion over the same time, hurting retirees and others on fixed incomes.

Interest earnings will fall further in 2009, now that the Fed has cut its lending rate to near zero.

Falling home prices are a boon for house-hunters; but a bane for sellers and for homeowners who have seen their home values plummet. Dropping stock prices, meanwhile, are good for those newly enrolled in 401k plans; but they have been a disaster for people in or near retirement.

What may be the biggest plus for the U.S. consumer sector is its ability to look forward. A survey by the Investment Company Institute in October showed that despite market volatility, investors remain committed to saving for retirement. Only 3% of participants have stopped making contributions this year.

And consumers are hopeful about the coming stimulus plan. A survey by the Center for American Progress indicates 70% of Americans think government spending on infrastructure is “the right thing” to do given current economic circumstances. Infrastructure spending will go a long way to create jobs in 2009.

Many households also should benefit from the other stimulus ideas being bandied about. A middle-class tax cut, aid to state and local governments, and investment in education should be pluses for the consumer sector in 2009. –Kathleen Madigan

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