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Senators Looking to Make Changes in Stimulus Plan
Alterations Could Complicate Conference Talks, Drive Up Cost

By Paul Kane
Washington Post Staff Writer
Monday, February 2, 2009

The Senate will open debate today on a nearly $900 billion economic stimulus plan that is similar in size and scope to the package the House passed, creating a possibly smooth path for sending a bill to President Obama's desk by the mid-February deadline.

But senators in both parties hope to alter the legislation, focusing on easing the housing crisis, increasing infrastructure spending and cutting taxes on corporations. If many of these changes are accepted in the Senate, which hopes to finish voting on the plan by Friday, it could complicate the effort to work out differences between the two bills. It could also drive the overall cost of the legislation, which was $819 billion in the House version and is $887 billion in the Senate plan, much closer to the politically shaky $1 trillion mark.

How many changes will the Senate make? "Maybe none, but we're going to try to make a case," said Sen. Charles E. Grassley (Iowa), the top Republican on the Finance Committee.

Grassley's key mission is trying to ensure that the funding formula for $87 billion in aid to governors for Medicaid is favorable to rural states such as Iowa, but the effort faces an uphill battle against a Democratic leadership team stocked with lawmakers from New York, California and Illinois.

The largest difference between the two measures is the Senate's inclusion of a tax break to prevent upper-middle-income families from slipping into the alternative minimum tax, which was created 40 years ago to make sure that the nation's wealthiest families were not able to shield their earnings from the Internal Revenue Service. That tax break added $70 billion to the Senate price tag, and House leaders are likely to accept it in the final draft despite conservative Democrats' concerns about the cost of a provision that lawmakers patch up every fiscal year without addressing the long-term consequences.

The largest tax cut in each bill is Obama's "Make Work Pay" provision, a credit of $500 per individual and $1,000 per family. The House version costs $145.3 billion, about $3.5 billion more than the Senate plan, because it makes the credit available to people with higher incomes. The Senate includes a $300 payment this year to retirees, disabled individuals and veterans, and other low-income Americans, a nearly $17 billion provision that is not in the House legislation.

The Senate also offers a more generous credit to businesses that experienced losses in 2008 and 2009, allowing 100 percent of those losses to be carried back into tax forms for the previous five years and thus providing most of the businesses with a quick stream of new cash. The House provision allows 90 percent of net operating losses from those years to be carried back into previous tax reports.

The Senate plan is more generous when it comes to the creation of "clean" energy, providing $109 billion in funding and tax breaks to encourage the production of renewable energy sources. The House plan provides $92 billion, according to an analysis by the Center for American Progress, a liberal think tank.

A small but growing number of senators are upset that neither bill provides money to address the housing crisis. "We should first fix the real problem: housing," said Sen. Lamar Alexander (R-Tenn.).

Republicans expect to offer an amendment that would create government-backed mortgages with interest rates between 4 and 4.5 percent. Sen. Kent Conrad (D-N.D.), chairman of the Budget Committee, said he disagrees with the administration's plan to address the housing and credit crisis with the $350 billion Congress just released to the Treasury Department as part of the financial rescue package approved last fall.

Conrad said that there is not enough money to deal with the mounting number of bank closures and mortgage foreclosures and that he would rather have Congress dictate the terms of assistance in the mortgage crisis than leave it to Treasury.

Labor unions are putting their weight behind amendments from a bipartisan group on the Senate public works committee, which is offering proposals to increase overall highway construction funding by $5.5 billion. With only about $30 billion going to highway and bridge construction, some lawmakers have complained, noting that such funds are the easiest to convert into instant projects that will create jobs. Another amendment would take $50 billion from funding that is not spent quickly -- the Congressional Budget Office estimates that more than $280 billion would not be spent until fiscal 2011 -- and instead divert it to highway projects.

House and Senate leaders expect to convene a conference next week to deal with the differences in their legislation, and the congressional tendency in past negotiations has been to remedy differences by simply spending more to make everyone content. But the $1.2 trillion deficit for this year has many lawmakers concerned about the total cost of the plan.

Even some Democrats are speaking out against including popular programs -- such as an almost $15 billion increase in funding for Pell grants for higher education -- in legislation that is supposed to spark an economic recovery.

"You don't want to be against Pell grants," said Sen. Ben. Nelson (D-Neb.). "But the question is: How many people go to work on Pell grants?"

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