The United States economy got a US$700 billion shot in the arm Friday - and Puerto Rico and the US Virgin Islands got a shot of assistance from rum.

Tucked into the unprecedented rescue package passed by Congress was a provision renewing a rum tax rebate to the US Caribbean territories.

Special tax benefits

Representative Steve LaTourette, R-Ohio, called the rebate "the most egregious" of the special tax benefits tacked on to the bailout bill in the Senate.

He was one of a group of House Republicans who kept their vows to oppose the bailout, partly because of the Senate add-ons.

But in a telephone interview with The Associated Press minutes before the 263-171 vote, Democratic Representative Charles Rangel brushed off concerns about the rum measure, estimated to be worth US$192 million over 10 years. His constituents in New York include many Puerto Ricans.

"It's been in effect many years, and was not put in like bows and arrows to get a vote," said the chairman of the Ways and Means Committee, referring to an even more obscure tax break inserted for wooden arrows used by children.

Puerto Rican and US Virgin Islands governments use the money to finance infrastructure and public services.

The rebate - which sends back all but 25 cents of the US$13.50 in federal excise taxes levied per proof gallon of rum produced in the islands - expired at the end of 2007.

The bailout bill extends it through 2009 and makes it retroactive to January 1.

Virgin Islands Governor John deJongh praised the islands' "friends in the Congress who resisted the effort to delete our rum provision because it provided a good 'sound bite' for opponents of the larger bill".

Bailout bill

Rangel compared the rum flap to a slight breeze amid a hurricane. But he said he still objects in principle to the bailout bill because the Senate had bundled in other initiatives, including other tax provisions and spending on energy and disaster aid, and "merged it into one vote".

Rangel said he had no choice but to vote "yes" on Friday to avert economic catastrophe.

"That's no way to legislate," Rangel complained to the AP. "They wait until the 11th hour and then they play chicken with us."

Frank Coleman, of the Washington-based Distilled Spirits Council, said the lobbying group received numerous calls from people who mistakenly believed rum producers, and not the island governments, would benefit directly from the provision. It is usually renewed with little controversy, he said, but "being part of the bailout took it to another level".

- AP