By Shailagh Murray and Lori Montgomery
Washington Post Staff Writers
Saturday, February 7, 2009
Against a backdrop of rising unemployment, Senate Democrats struck a hard-won deal yesterday with a handful of Republican moderates to scale back spending in a massive economic stimulus bill, virtually guaranteeing Senate passage of the legislation but also ensuring arduous final negotiations with the House.
The compromise represented a dramatic finale to a tumultuous and frustrating week for Democrats pushing the package, as Senate Majority Leader Harry M. Reid (D-Nev.) saw the limitations of an expanded majority and a band of GOP centrists came to appreciate the very high price they can extract for their votes on key measures.
The bipartisan deal was cut after two days of talks and would cut more than $100 billion from the $920 billion bill, dropping its cost to about $820 billion, if amendments added on the Senate floor are retained.
Most Republicans remained strongly opposed to the compromise bill, saying it was too costly and ineffective, and Democratic leaders were counting on just three GOP votes for the plan as of last night but hoped to expand the number before a final vote.
Moments after Reid announced the deal on the Senate floor, GOP lawmakers said that they will seek to delay a final vote through procedural objections, which could push debate to as late as Monday.
Senators worked late into last night on a time agreement to bring the bill to a vote. The pipeline was still clogged with amendments, many of them offered by conservative Republican senators, with little chance of passing. But Reid was determined to make sure the debate remained open and free-flowing, in keeping with the tone that President Obama urged.
But the likely passage of the legislation represents a significant victory for Obama, who has put his political capital on the line to relentlessly stress the immediate need for the bill, even as it swelled in cost and lost GOP support.
Obama endorsed the moderates' effort and brought its leaders -- Sens. Ben Nelson (D-Neb.), Susan Collins (R-Maine) and Arlen Specter (R-Pa.) -- to the White House to discuss their proposed cuts. White House Chief of Staff Rahm Emanuel attended the final meetings in Reid's office last night to work out lingering differences. Before Emanuel arrived, Collins said, Democrats were advocating $63 billion in cuts. "Then Rahm got involved, and a much better proposal came forward," she said.
The goal of the bill is to save or create up to 4 million jobs over the next two years, helping to offset the loss of 3.6 million jobs since December 2007, when the nation began its descent into what economists predict will be the worst recession since the Great Depression. With businesses shedding jobs and watching profits plummet, and with the Federal Reserve having slashed interest rates effectively to zero, many economists say a huge injection of government spending is the best hope for easing the effects of the downturn.
Obama will head to Indiana and Florida next week to campaign for the quick reconciliation of the House and Senate versions, although given the cool reception that the Senate's additional cuts received from House Democratic leaders yesterday, Congress's self-imposed Feb. 13 deadline to send the bill to Obama's desk now appears a monumental challenge.
House Speaker Nancy Pelosi (D-Calif.) said the proposed reductions "do violence to what we are trying to do for the future," especially on alternative energy and education, two areas Democrats believe were long neglected under President George W. Bush. "The cuts are very damaging," she told reporters at a House Democratic retreat in Williamsburg.
Pelosi also played down the need for Republican input. "Washington seems consumed by this process argument of bipartisanship," she said. The House's $819 billion stimulus package passed without a single Republican vote for it.
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.