By David Cho and Michael A. Fletcher
Washington Post Staff Writers
Monday, February 9, 2009
Senior Obama administration officials sought to intensify pressure on Congress yesterday to pass a massive stimulus package for the crumbling economy, warning lawmakers of the consequences of delay while rescheduling the unveiling of their financial rescue plan to keep the spotlight on Capitol Hill.
The White House asked Treasury Secretary Timothy F. Geithner to focus today on winning congressional support for the stimulus bill instead of detailing a highly anticipated initiative to aid financial firms, consumer credit markets and struggling homeowners. That rescue plan announcement was moved to tomorrow.
The Senate will hold a key procedural vote today on the stimulus package to determine whether a compromise struck this weekend, which removed about $100 billion in spending from the bill, will persuade enough Republicans to support the measure.
Even if senators approve the bill, which carries an $827 billion price tag, they face the daunting task of negotiating a final bill with the House, which passed its own version last week with far more spending proposals and fewer tax cuts. Democratic aides warned yesterday that it could be difficult to get the stimulus to the president's desk by Congress's self-imposed deadline of Friday.
President Obama plans to fly today to Elkhart, Ind., where the unemployment rate has soared to 15.3 percent -- about twice the national average -- before holding a prime-time news conference to urge congressional leaders to quickly reconcile the two versions of the bill.
The administration's top economic officials said yesterday that, as negotiations on the stimulus bill progress, Obama is interested in restoring support for education and for cash-strapped state and local governments -- measures that were stripped out in the Senate version of the plan.
To persuade enough moderate Republicans to vote for the measure, leaders also added tax credits for home and auto purchases, and provided relief from the alternative minimum tax.
Still, the administration downplayed differences between the House and Senate measures, saying it was critical that Congress act swiftly.
"The most important thing is to get this done for the sake of an economy that lost 600,000 jobs in one month," Lawrence H. Summers, director of the National Economic Council, said yesterday on ABC's "This Week."
The plan has come under intense criticism from many Republicans, who have called it unfocused and wasteful. They also have complained that they have been locked out of the bill-writing process, despite Obama's public efforts to reach out to Republicans.
"I know we're in trouble. I know America needs a stimulus. We need tax cuts. We need to spend money on infrastructure and on other programs that will immediately put people to work. But this is not it," Sen. John McCain (R-Ariz.) said on CBS's "Face the Nation."
"You need to get it right. You don't want to spend these precious taxpayer dollars in the wrong way," Sen. John Ensign (R-Nev.) said on NBC's "Meet the Press."
Christina D. Romer, chair of the Council of Economic Advisers, warned that if a large stimulus plan were not enacted, it would have a "catastrophic" impact on the economy. "I feel very strongly it's in our hands, that if we can get this package through, we can turn it around and be back on the road to growth," Romer said on CBS.
"The center of this stimulus bill is massive, unaccountable government spending, and the American people are tired of it," countered Rep. Mike Pence (R-Ind.) on NBC.
Administration officials have emphasized that the economy needs both the stimulus package, which is aimed at creating millions of jobs and reviving consumer spending, and the financial system rescue plan, which is supposed to loosen the credit markets that provide the loans for homes, cars and businesses.
The rescue plan will lay out how the government intends to spend the second half of the $700 billion that Congress approved in October. It will attack the core issue facing banks: the toxic assets backed by failing mortgages and other loans that are weighing down their balance sheets and freezing up the lending markets. The administration will aim a one-two punch at this problem by insuring the losses on some of the bad assets while providing incentives for private investors to buy others, sources in contact with the administration said.
The rescue package is also expected to expand a Federal Reserve program to aid the trading of assets that finance the commercial real estate and residential mortgage markets. In addition, it will lay out a way for the government to invest in banks through bonds or preferred shares that could eventually give the government partial ownership if the banks don't pay back the aid. Administration officials are expected to detail clear guidelines for how financial firms can get this money, as well as how the government will expand oversight.
But the administration is not as far along on the part of the rescue plan that would spend $50 billion to $100 billion to help homeowners and may reveal only the broad outlines of that tomorrow.
One idea being considered is to have Fannie Mae and Freddie Mac set standards for how and when lenders should modify loans for homeowners facing foreclosure, according to two industry sources familiar with the matter. These sources cautioned, however, that the plan was highly fluid.
Staff writers Zachary A. Goldfarb, Renae Merle, Lori Montgomery and Shailagh Murray contributed to this report.