The initial GDP estimate for the first quarter of 2008 (based on data from October, November and December 2007) came in yesterday at a very low 0.6%.

That’s a big reduction from the 4.9% increase in the 3rd quarter, and makes clear that the subprime and credit market problems that emerged beginning in August are reverberating through the broader economy.

Congress is responding. The House passed stimulus legislation on Tuesday by an overwhelming margin that would provide tax rebate checks to families of $1,200 per couple and $300 per child, as well as allowing businesses to write-off investments faster and banks to write larger conforming loans.

And the Senate? Well, it’s a different animal. As we noted previously, the Senate Finance Committee was considering a number of changes and additions. The markup ended last evening and, as adopted by the Committee, the Senate package added numerous provisions to the core package outlined last week, including:

  • Higher income limits for the rebates of $150,000 for individuals and $300,000 for couples;
  • Extended unemployment benefits;
  • Energy tax credits;
  • Mortgage Revenue Bonds;
  • Five-year net operating loss carry-back for 2007 and 2008; and
  • Reimbursements to coal companies for interest on certain unconstitutional excise taxes paid on exported coal.

Where does it go from here? Well, the Senate is currently considering FISA reauthorization and the Senate Democrats have their annual retreat beginning tomorrow, so it’ll either pass today or next week, with the smart money betting on next week.

Once the Senate passes its version, it’ll likely be different than the House bill and will have to be considered again by that body, so the earliest Congress could pass this package and get it to the President would be the end of next week.

We’ll keep you apprised of the progress of the bill.