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Bipartisan Deal Eases Way For Stimulus Bill in Senate

President Barack Obama will visit two cities hit hard by the economic downturn as he promotes his stimulus plan. Obama will visit Elkhart, Ind. and Ft. Myers, Fla. Video by AP

Most GOP senators shared the view of their House colleagues -- that the stimulus package had grown too unwieldy and wasteful and would do little to aid the staggering economy. This week, it became increasingly clear that a handful of moderate Senate Democrats also objected to the House-passed bill.

The bipartisan group grew to nearly 20 senators, although Republicans began to abandon the effort once it became clear that the bill would stay close to the $800 billion level that Obama advocated. "We took a careful, thoughtful, comprehensive approach," Collins said.

She called the Senate legislation "a considerable improvement over the House-passed bill," which she described as "loaded, expensive and ineffective." The new version, she said, "will help Americans throughout this country who are struggling because they lost their jobs."

Obama said of the evolving legislation, "The bill before Congress isn't perfect, but it is absolutely necessary." In remarks yesterday at a White House appearance to introduce a new Economic Recovery Advisory Board, he said: "We will continue to refine it and improve it. There may be provisions in the bill that need to be left out and some that need to be added. But broadly speaking, it is the right size. It is the right scope. It has the right priorities."

The Senate changes bring what had been a $920 billion package down to about $820 billion. Among the largest cuts: $40 billion from a $79 billion fund aimed at helping states preserve school funding as they try to balance their budgets. And negotiators cut in half $15 billion in "incentive grants" for states that meet certain goals for their initial education allotment.

"Education took a big hit here," said Sen. Kent Conrad (D-N.D.).

The compromise also would cut $5 billion from a plan to help unemployed workers pay for health-care coverage, reducing the amount the federal government would pay for COBRA premiums to 50 percent from 65 percent. And it would cut $2 billion from a plan to help critical-access hospitals computerize medical records.

A smaller number of changes would reduce the size of the Senate's tax package, including a $9 billion revision to a credit for investors in low-income housing and a $2 billion adjustment to the president's Making Work Pay credit that would eliminate the benefit for some taxpayers.

The overall price of the package could go lower. Two amendments added over the past week could be trimmed or eliminated, Democrats said.

A prime target may be a proposal by Sen. Johnny Isakson (R-Ga.) that could cost as much as $36 billion. It would offer a $15,000 tax credit to anyone who buys a home in the next two years. Despite the addition of his proposal, Isakson has not agreed to support the final bill.

Another provision that could be cut back is an $11 billion proposal by Sen. Barbara A. Mikulski (D-Md.) to provide a tax credit worth as much as $1,500 for the purchase of an American-built vehicle.

Negotiations with the House could also dramatically alter the package. While the bills in the two chambers are now likely to be similar in size, the Senate has increased the percentage of its legislation devoted to tax cuts. The biggest change is the addition of a $70 billion provision that would protect more than 24 million families from the alternative minimum tax.

House moderates oppose including the AMT provision in the stimulus package, arguing that the issue should be addressed in the regular budget process so that its cost can be offset by spending cuts or tax increases. But until yesterday, House leaders appeared willing to accept the provision, which was added at the urging of Sen. Charles E. Grassley (Iowa), the senior Republican on the Senate Finance Committee.

With AMT in and some of House Democrats' top spending priorities out, the package could become much more difficult for many House members to swallow, Democratic aides said. House Majority Leader Steny H. Hoyer (D-Md.) said House Democrats will push hard to restore the Senate's deletions. That means, lawmakers said, that the overall cost would grow to around $900 billion to accommodate the AMT fix.

Said House Majority Whip James E. Clyburn (D-S.C.): "I don't think much of what the Senate is doing."

Staff writer Perry Bacon Jr. contributed to this report.

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