By Shailagh Murray and Paul Kane
Washington Post Staff Writers
Saturday, February 14, 2009
With the final vote coming late in the night, Congress yesterday approved a $787 billion stimulus package that aims to spur millions of jobs through massive new investments in energy, transportation, education and health-care projects, while reviving social safety-net programs that have been shrinking for nearly three decades.
The legislation represents the start of a new ideological era that places the federal government at the center of the nation's economic recovery. It also provides a down payment on much of President Obama's domestic agenda, including his pledges to upgrade the nation's aging roads, bridges and electricity grid; overhaul health-care record-keeping and invest billions in alternative energy research to reverse climate change and wean the country from foreign oil.
The passage is an early triumph for Obama, even though he was able to attract only three Republican senators to sign on to an effort that he once hoped would pass with large majorities from both parties. Nevertheless, the White House and Democratic congressional leaders were able to move what became an 1,100-page bill from first draft to final passage in less than a month, keeping to the ambitious timetable they set.
The package combines tax cuts with new spending, and three-quarters of the money is planned to reach state capitals, businesses and individual taxpayers by the end of September 2010. Its virtues and limitations will remain uncertain until the money is paid out in the form of road projects, unemployment checks and energy-efficient building improvements, but its reach is already clear.
The New Deal of the 1930s equaled no more than 2 percent of the nation's gross domestic product. The new legislation represents over 5 percent and is probably no more than an opening bid -- Obama and his congressional allies will next turn to the foreclosure crisis, the reform of financial markets and an overhaul of federal budget practices.
"Passing this plan is a critical step," Obama said at the White House yesterday morning. "But as important as it is, it's only the beginning of what we must do to turn our economy around."
Republicans were scornful of the legislation, depicting it as pork-laden and ineffective. "This bill is supposed to be about jobs, jobs, jobs, and it's turned into nothing more than spend, spend, spend," said House Minority Leader John A. Boehner (R-Ohio).
White House officials predict the measure will create 3.5 million jobs over the next year and a half, easing the effects of the worst economic downturn in a generation.
Some private analysts said the slimmed-down measure is likely to fall well short of that goal, creating fewer than 2.5 million jobs and leaving the unemployment rate over 9 percent through 2010. They also cautioned that even if the package boosts economic activity, conditions are likely to continue to deteriorate unless the administration finds a way to thaw frozen credit markets and revive the paralyzed banking system.
"The financial crisis we're battling against is extreme, and if we can't start to get the financial crisis under control, then whatever we do on the fiscal side isn't going to help that much," said Nigel Gault, chief U.S. economist at the private consulting firm Global Insight.
Among the stimulus's chief beneficiaries are people who are unemployed or otherwise struggling through the downturn. Its hefty investments in Medicaid and education troubled even some moderate Democrats for their degree of federal intervention and helped to mobilize a group of Senate centrists to cut $100 billion from the bill.
Liberal Democrats were disappointed by the reductions. But in one speech after another on the House floor yesterday, lawmakers spoke emotionally of the bill's historic reach.
"I think we need to appreciate that the bill is the largest change in domestic policy since the 1930s," said House Appropriations Committee Chairman David R. Obey (D-Wis.).
House Speaker Nancy Pelosi (D-Calif.) said yesterday that money for developing such things as electric cars, clean-coal power plants and bullet trains will be "transformational," even though those funds will be some of the slowest to be spent, according to a study by the Congressional Budget Office.
"We will harness the sun and the wind and soil to fuel our cars and run our factories," Pelosi said.
Obama pressed Democrats to include substantial tax relief favored by Republicans, including a Making Work Pay tax credit worth $400 for middle-class individuals and $800 for couples, along with a fix to the alternative minimum tax that will translate into a tax savings for upper-middle-class families.
The package also contains numerous business breaks, including one that encourages new capital investments and another that allows small businesses to write off losses more quickly.
Other major items went to help the neediest. A $20 billion provision will expand the food stamps program. And about $20 billion will help unemployed workers purchase health care through the employer-based COBRA system, for a period of up to nine months.
Pell Grants for working-class college students will grow by more than $15 billion, increasing the maximum benefit by $500. A separate tax credit will further reduce college tuition costs for students whose parents earn less than $180,000 per year, or $90,000 for single-parent households.
The stimulus also repeals a tax-rule change the Treasury Department made last fall that had been estimated to cost up to $140 billion. The change allowed banks to reduce their taxes by using the losses of companies they purchase to offset income. For several of the stronger banks that bought weaker ones last fall, the tax savings more than covered the cost of the acquisition.
Republicans seized on dozens of narrow spending provisions that survived in the final bill, including $50 million for the National Endowment for the Arts; $25 million for Smithsonian Institution maintenance; and $198 million for Filipino World War II veterans, a priority for Senate Appropriations Committee Chairman Daniel K. Inouye (D-Hawaii). They also took aim at $8 billion for high-speed rail investments that may include a line between Las Vegas and Los Angeles, championed by Senate Majority Leader Harry M. Reid (D-Nev.) and the casino industry .
Obama attended luncheons of the House and Senate GOP conferences last month, determined to show the bipartisan outreach that he pledged during his campaign. He especially courted moderate Republicans through Oval Office visits and a White House Super Bowl party.
But during yesterday's vote, Reps. Michael N. Castle (Del.) and Fred Upton (Mich.), the two moderate Republicans considered most likely to support the stimulus, moved to chairs on the center aisle of the House floor and stared at the electronic board tallying their colleagues' votes. Upton, who traveled with Obama to Indiana on Monday, and Castle, a close friend of Vice President Biden, cast "no" votes moments before the clock ran out.
The House Republicans' list of excessive spending totaled about $25 billion, enough to make GOP lawmakers such as Rep. Candice S. Miller, whose Michigan district has suffered staggering job losses, oppose the measure.
"There may be some good things in this bill," Miller said in a speech on the House floor. But, her voice rising, she pointed to the high-speed rail provision and contrasted its generous funding to a small tax credit for car buyers that barely survived. "You have to be kidding," she exclaimed.
Staff writer Lori Montgomery contributed to this report.