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Obama Pitches Stimulus Plan
GOP Asked to Help Design Bill; $300 Billion in Tax Cuts Sought

By Paul Kane, Lori Montgomery and Shailagh Murray
Washington Post Staff Writers
Tuesday, January 6, 2009

President-elect Barack Obama arrived on Capitol Hill yesterday and immediately set to work reassuring skeptical Republicans about his massive economic stimulus package -- part of a campaign that earned him praise for seeking their input but questions from those averse to hundreds of billions of dollars in new spending.

Pitching a plan that is expected to include $300 billion in tax cuts, Obama pledged to consult Republican leaders, who until yesterday had been left out of negotiations between the president-elect's advisers and congressional Democratic staff.

"The monopoly on good ideas does not belong to a single party. If it's a good idea, we will consider it," Obama told House and Senate leaders at an hour-long closed-door meeting, according to one attendee.

Obama, making his pitch two weeks before taking office, won generally favorable reviews from GOP leaders, particularly because of his decision to increase the tax-cut ratio to 40 percent of the overall package.

Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader John A. Boehner (R-Ohio) told reporters they were convinced that Obama was sincere in his invitation to let Republicans help craft the nearly $800 billion package to create jobs and lift the nation out of recession. But they also expressed concerns about the size of the package, as well as particular elements under discussion between Obama and Democratic lawmakers.

"I remain concerned about wasteful spending that might be attached to the tax relief. Simply put, we should not bury future generations under mountains of debt," Boehner said.

Boehner suggested the legislation would likely be signed into law by mid-February, but the president-elect said yesterday that he would like the House and Senate to present him with a bill by the end of January or beginning of February.

"The economy is very sick," Obama said. "The situation is getting worse. . . . We have to act and act now to break the momentum of this recession."

As described by his advisers, Obama is proposing a package of tax cuts to benefit families and businesses. Like the overall spending proposal, the tax cuts would be designed to put cash in people's pockets over the next two years and kick-start the economy.

Working families would be eligible for a tax credit worth up to $1,000. Individuals would be eligible for a $500 credit.

Businesses would get an extension of expired tax breaks from the 2008 stimulus package signed by President Bush, including a "bonus depreciation" break that allows businesses to write off more of their purchases more quickly and an increase in small-business expensing limits. Businesses could apply current losses to taxes paid back as far as five years ago, reaping an immediate cash windfall. And they would receive a $3,000 tax credit for every job they create or preserve.

Key details of the stimulus proposal remain unresolved. For instance, upper-income individuals would not be eligible for the income tax credit, but the income threshold for phasing out the benefit has not been set. Obama officials said it would likely be about $200,000 a year, the range set during the campaign.

Obama officials said they tried to keep the package ideologically neutral, rejecting an option supported by many progressives to make people who are not working eligible for a "refundable" tax credit. And they passed up conservative provisions such as estate tax relief and capital gains tax cuts that disproportionately benefit wealthier individuals.

After a lunchtime session with his economic advisers, Obama rejected suggestions that the tax cuts were designed to win over GOP votes. "The notion that me wanting to include relief for working families in this plan is somehow a political ploy, when this was a centerpiece of my plan for the last two years doesn't make too much sense," he told reporters.

Some prominent Republicans expressed reservations about the tax proposals' specifics. Jon Kyl (Ariz.), a member of the Senate Republican leadership team, said he hadn't studied the list of proposed cuts, but that he favored reducing corporate and capital gains taxes, and providing more generous small-business incentives. And, he said, "These changes should be permanent, rather than just temporary."

Sen. Charles E. Grassley (Iowa), the senior Republican on the tax-writing Senate Finance Committee, said he would prefer a tax package that is "inclusive rather than exclusive" and that offers relief to "as many as taxpayers as possible." One option, according to a senior Grassley aide, would be to include a $75 billion provision to prevent the alternative minimum tax from applying to millions of additional families.

It is also not clear that tax cuts are the most effective way to win GOP votes. Two key Republican moderates in the Senate -- Susan Collins and Olympia J. Snowe, both of Maine -- have not focused on tax breaks as the best solution to the economic crisis.

In a letter to Obama last month, Collins outlined her stimulus priorities as transportation construction projects, energy-efficiency investments and a temporary increase in Medicaid assistance to states. In conversations with Obama and his Treasury secretary-designate Timothy F. Geithner, Snowe has urged the inclusion of unemployment assistance, mortgage relief for strapped homeowners and programs to ease the credit crunch facing small businesses.

"With more than 10.3 million people currently out of work, Congress must swiftly enact economic recovery legislation that will create jobs, assist the unemployed and reduce the devastating rate of home foreclosures," Snowe said.

Obama bounced across the Capitol yesterday to take part in three meetings, beginning with a one-on-one meeting with House Speaker Nancy Pelosi (D-Calif.) in the morning and a sit-down in the early afternoon with Senate Majority Leader Harry M. Reid (D-Nev.). The final meeting was with the bipartisan leadership from both chambers.

Democrats described the atmosphere as markedly different than the confrontational tone of recent battles with the Bush White House, in part because the new administration is run by former senators.

"They understand the Senate, they understand the Capitol. It wasn't as if someone new was coming to town," Sen. Richard J. Durbin (D-Ill.), the majority whip and close Obama ally, said afterward.

Some Republicans, while saying they were pleased by Obama's attempt to open dialogue, questioned whether the spending side of the plan would be transparent enough. Rahm Emanuel, Obama's chief of staff, pledged to put details of the spending plan online, including the creation of a monitoring system for the progress on some of the projects, according to one attendee.

Some independent analysts joined GOP aides in questioning Obama's tax credit for job creation, saying it's unclear how such a provision would be crafted.

"When somebody lays off 10,000 people but hires back 1,000, should they get a tax credit? That doesn't really seem fair," said Leonard Burman, a director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution. "The problem with these things is defining what qualifies."

Meanwhile, some Republicans and moderate Democrats are pushing Obama to commit to addressing the nation's long-term budget problems even as his stimulus package pushes the government deeper into debt. With congressional budget analysts expected to announce later this week that this year's deficit is likely to soar well over $1 trillion, a commitment to reducing future deficits is critical, said Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee.

"At some point here, you have to pivot and face up to these long-term problems," said Conrad, who along with Sen. Judd Gregg (R-N.H.) is proposing a commission to re-examine the expensive entitlement programs Social Security, Medicare and Medicaid.

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