By Shailagh Murray and Paul Kane
Washington Post Staff Writers
Thursday, February 12, 2009
Congressional leaders agreed yesterday on the details of a nearly $790 billion stimulus package, an unprecedented attempt by the federal government to jolt the economy, create millions of jobs and ease the financial woes facing individuals, businesses and states.
The House is expected to vote on the plan today or tomorrow, and with Senate action quickly following, the legislation is set to arrive on President Obama's desk no later than Monday -- the target Democratic leaders set last month for enacting it into law.
The final product is similar to the ideas Obama outlined when he took office on Jan. 20, but it claims many co-authors, including House liberals who saw a rare opportunity to secure new social spending, as well as the three moderate Republican senators who demanded $100 billion in cuts as the price of their support.
Three months ago, the stimulus plan was envisioned as a $300 billion rescue package that the incoming Obama team had hoped would be enacted well before Inauguration Day, which would have cleared the way for the new White House to start from scratch on an ambitious domestic agenda. Instead, it became a politically charged first test for the Obama administration and the newly expanded Democratic Congress, as well as a rallying point for congressional Republicans.
The bill is made up of four broad categories: tax breaks for individuals and businesses; investments in health care and alternative energy; funding for "shovel-ready" infrastructure projects; and aid to state and local governments, including expanded benefits for individuals who are unemployed and lack health insurance.
After a tentative agreement was struck between Democratic leaders of the two chambers yesterday afternoon, some House Democrats appeared eager to scuttle the deal, as lawmakers vented about deep reductions in education and other social programs. At one point, Democrats in a hastily called meeting jokingly chanted "We want more" before relenting. Speaker Nancy Pelosi (D-Calif.) later told reporters: "We have come to an agreement with the Senate as to how we will go forward and I think people are happy about that." There are some provisions "we wish that were still there," she said, "but the fact is that there's plenty there to create nearly 4 million jobs that the president has set as our goal."
In announcing the deal, Senate Majority Leader Harry M. Reid (D-Nev.) said: "Like any negotiation, this involved give-and-take -- and if you don't mind my saying so, that's an understatement. But the agreement we've reached stays faithful to the principles."
Obama has said that whether the legislation creates the millions of jobs he has promised will be the measure of its success or failure, and many economists remain highly skeptical about its potential for providing a significant boost to the sagging economy. But in the near term, the compromise stands as the first major achievement of the new administration.
Many details of the package remained elusive last night, but initial calculations showed that the bill includes $282 billion in tax breaks, including a temporary fix to the alternative minimum tax and a new tax credit for home buyers, although it was drastically reduced from the Senate-passed version. Spending for highways, bridges and other transportation projects is nearly $50 billion. The measure would provide an additional 20 weeks of unemployment payments and health-care subsidies for people who are out of work. Social Security recipients would receive an additional $250 payment, and the federal government's contribution to the Medicaid program would increase dramatically.
Obama called the bill "a hard-fought compromise that will save or create more than 3.5 million jobs and get our economy back on track." But despite the acknowledgment of ceding some ground, the president secured many of his biggest priorities in the legislation, including the longer-term health-care and energy investments that the administration views as a down payment on broader reforms.
To keep the pressure on, Obama will travel to Peoria, Ill., today to visit the headquarters of Caterpillar, a mainstay of his home state's economy, which recently announced that it will lay off more than 20,000 workers. Obama said Jim Owens, Caterpillar's chief executive and a recently appointed member of the White House's new Economic Recovery Advisory Board, relayed that if the stimulus bill passes, "his company would be able to rehire some of those employees."
Although a trio of GOP moderates -- Sens. Arlen Specter (Pa.), Olympia J. Snowe (Maine) and Susan Collins (Maine) -- succeeded in paring spending provisions written in the House and securing more tax relief, the changes did not make much of a dent in Republican resistance to the measure. Obama wooed House and Senate Republicans in closed-door meetings and at a bipartisan White House cocktail party, but the House bill passed earlier this month with no GOP support and the Senate version drew only the three GOP negotiators. Democratic leaders said they do not expect that to change significantly before final passage.
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.