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Congress Reaches Stimulus Accord

Senate Majority Leader Harry Reid has announced agreement on an economic stimulus bill. He says the legislation should create 3.5 million jobs once President Barack Obama signs it into law and it takes effect. Video by AP

Even freshman Rep. Aaron Schock (R-Ill.), whose district includes Caterpillar's headquarters, was reluctant to commit. "I'm concerned with much of the spending that doesn't do much to create new jobs," he said.

Two major sticking points heading into final negotiations were the increased Medicaid payments to states and nearly $20 billion in school construction funding, both top priorities for House Democrats and the White House. But Collins, in particular, opposed creating a separate federal program for school construction, and the Senate bill she helped negotiate included no school-construction provision.

Instead, Senate Republicans agreed to increase a general state fund to $54 billion, a portion of which could be spent rebuilding schools. "We hung tough," Collins said.

The White House conceded ground from the outset. One centerpiece of Obama's original plan, promised to voters on the campaign trail, was a $3,000 business credit for job creation. But it drew bipartisan criticism, and the White House dropped it quickly.

This week, Obama agreed to scale back a tax break for individuals, one of the few elements in the bill that would have put money directly in the hands of taxpayers.

Collins said the White House suggested the reduction to its "Make Work Pay" proposal as a way to reduce the overall size of the legislation. Obama had proposed a $1,000 tax break for families and $500 for individuals; the numbers were trimmed to $800 and $400, sums that would be distributed mainly through reduced payroll tax withholding.

The final package will substantially reduce the Senate's $15,000 tax credit for home buyers, placing income limits on who could benefit and reducing the overall cost from $35 billion to about $5 billion, Collins said. While most of the key compromises involved cutting the legislation's cost, negotiators did raise the amount of funding for highway, bridge and rail construction projects to $49.6 billion, an increase of more than $3.5 billion from the Senate's legislation.

Last night's conference committee meeting -- which ended in confusion and without a formal vote -- was the culmination of more than three months of intense negotiations that began shortly after Obama's election on Nov. 4. When Pelosi proposed a $300 billion stimulus plan, she was rebuked by Republicans, who over the summer had blocked a comparably meager $60 billion package.

Within weeks of the election, however, Obama's advisers more than doubled the Pelosi proposal by suggesting a range of $675 billion to $775 billion, after surveying the depth of the economic crisis and determining that government action should be far more aggressive.

Obama also asked for 40 percent of the legislation to come in the form of tax cuts, including business relief proposals that congressional Democrats quickly dismissed as unlikely to stimulate the economy. When the House took up the bill, tax relief dropped to just 22 percent of the total cost, according to the Congressional Budget Office. And less than 65 percent of the money would be spent in the first 18 months of the bill's passage, well below Obama's target of 75 percent.

But as a deal emerged from the tumultuous negotiations of the past two days, the bill followed remarkably closely to the broad outline that Obama had painted more than a month ago. The overall cost is just $14 billion more than his original top-end target, while the portion of tax cuts comes to 36 percent, only slightly below his initial goal.

Staff writers Perry Bacon Jr. and Ben Pershing contributed to this report.

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