Negotiators Grappling With Stimulus Plan
White House, Hill Strive to Maintain Bipartisanship

By Jonathan Weisman and Peter Baker
Washington Post Staff Writers
Thursday, January 24, 2008

The White House and congressional leaders struggled yesterday to preserve their newfound alliance on the economy in the face of revolts in both parties over the shape of a potential stimulus package and of debates over issues such as health care and warrantless surveillance.

Treasury Secretary Henry M. Paulson Jr. and House Speaker Nancy Pelosi (D-Calif.) neared agreement last night on a tentative plan aimed at reinvigorating a battered economy. Pelosi met last night with committee chairmen while Paulson was running the tentative agreement by the White House ahead of what could be a final meeting this morning.

But there were signs that the bipartisan spirit of recent days was beginning to fray. Some Republican lawmakers, including the party's Senate whip, tried to slow the momentum toward a deal while Democrats piled on additional spending demands.

At the same time, unrelated disputes threatened to divide President Bush and Democratic congressional leaders as they are seeking to remain unified on the economy. House Democrats tried and failed yesterday to override Bush's veto of an expansion of a children's health-care program, while Senate Democrats tried to block the permanent extension of the government's authority to eavesdrop on terrorism suspects without warrants.

Bush advisers and congressional leaders working on the economic package recognized that they need to hurry, not only to influence the economy as soon as possible but also to prevent Washington's natural partisan dynamics from pulling apart the chances for success. "The longer something sits out there, the more additional things get on the table," said a senior administration official who spoke on the condition of anonymity because talks remain underway.

There were signs that both sides were trying to avoid at least some provocations until an economic package is passed. House Democrats decided to hold off any action on contempt citations against White House Chief of Staff Joshua B. Bolten and former White House counsel Harriet E. Miers over the investigation of the firings of U.S. attorneys. And Vice President Cheney avoided his usual red-meat attacks in a speech arguing for the surveillance measure.

White House spokesman Tony Fratto said that when it comes to the economic package, "it's pretty clear that everyone is trying to talk these things through in good faith, and there's a sense of urgency. And so that will brace you to action."

But some top lawmakers quickly returned to the partisan scrapping of last year. House Democratic Caucus Chairman Rahm Emanuel (D-Ill.) called a news conference to denounce the seven years of Bush's stewardship, which have been marked, he said, by slow job growth, a mounting federal debt, sliding household incomes and a plunging world public opinion of the United States. "By any measure," he said, "America is worse off today, over the last seven years, than it was as a country that George Bush inherited." And Senate Majority Leader Harry M. Reid (D-Nev.) scheduled a news conference for today in which Democratic senators plan "to discuss Bush's legacy of broken promises."

Rep. Mike Pence (R-Ind.) fired back, blaming the nation's economic ills on the Democratic-controlled Congress. "One year into a liberal Democrat majority in Congress, surprise, surprise, the economy is struggling," he said. "You don't need to apply liberal principles and policies on an economic slowdown that is being driven by liberal policies on Capitol Hill."

And the White House risked the ire of Senate Democrats by renominating Steven G. Bradbury as assistant attorney general despite lawmakers' refusal to confirm him because he signed off on memos authorizing harsh interrogation techniques of terrorism suspects.

Negotiators tried to ignore the surround-sound and to focus on working out a deal. Paulson met several times and spoke by telephone repeatedly with Pelosi and House Minority Leader John A. Boehner (R-Ohio) to hammer out the details of a $145 billion economic-stimulus package. Aides reported that they had the outline of a deal and were crunching numbers last night to see if they worked.

The broad outlines of a package have been clear for days: tax rebates for individuals to spur consumer spending, business tax breaks to prompt new investment and the extension of social welfare benefits such as unemployment aid and food stamps. But one congressional official said Democrats might give up the unemployment and food stamp spending in exchange for a progressive rebate plan that sent checks to all workers who make less than $75,000 a year or married couples who make less than $150,000.

Even if an agreement is reached and passed by next month, taxpayers might not see their rebate checks until June. As the Joint Committee on Taxation reported on Tuesday, the Internal Revenue Service has said that it would take at least 60 days to design and implement the program needed to make the payments, and that the processing could not start until after the tax season's peak is over, in May.

Democratic negotiators closed in on housing initiatives to be folded into the package. House Financial Services Committee Chairman Barney Frank (D-Mass.) said administration officials agreed to expand the Federal Housing Administration's ability to insure higher-priced mortgages and to help homeowners threatened by foreclosure to renegotiate their loans, without sharp increases in their payments.

The package is likely to temporarily increase the size of jumbo mortgages that can be bought by government-sponsored Fannie Mae and Freddie Mac -- from $417,000 to as high as $700,000 in high-cost housing markets. Frank said the package would also have funds for low-income heating assistance and summer-job programs for youth.

But other Democrats pressed for more. Sen. Charles E. Schumer (N.Y.) assured big-city mayors that the package would help offset a looming state and local budget crunch. "It makes no sense to give a rebate if local governments are going to have to raise taxes," he said.

Other Democrats want the federal government to assume some state costs for Medicaid or to eliminate the backlog of veterans' benefit claims by considering all the claims to be valid as the government sorts through the logjam. Sen. James Webb (D-Va.) sent a letter arguing for public works projects to create jobs, citing Washington area traffic congestion.

On the other side, some Republicans denounced the premise of the package, saying one-time tax rebates would do nothing to spur economic growth. Rep. Paul D. Ryan (Wis.), the ranking Republican on the House Budget Committee, bemoaned what he said is a move toward "a package that is good politics but not good policy." The Republican Study Group, representing House conservatives, released its own plan calling for a series of permanent corporate and capital-gains tax cuts.

Senate Republicans, in a closed-door retreat, peppered Paulson with questions about the stimulus plan. Minority Whip Jon Kyl (Ariz.) urged negotiators to slow down. "There are folks in this country that are hurting, and you want to make sure you do the best you can," he said, "but sometimes the notion that you can do something really quickly is contrary to good judgment."

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