Senate Leaders Reach $780 Billion Compromise

Senate Leaders Reach $780 Billion Compromise
Democrats and GOP Moderates Negotiate a Leaner Plan as Obama Ratchets Up the Pressure After Dismal Economic Report

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By GREG HITT and JONATHAN WEISMAN

WASHINGTON -- Senate Democratic leaders struck a deal with a handful of moderate Republicans late Friday on a leaner economic-recovery package and pushed for a vote after five days of partisan deadlock over a plan that had swollen to $930 billion.

Senate leaders valued the compromise, struck on the same day as the government announced the loss of nearly 600,000 more jobs in January, at about $780 billion, although some aspects of the plan remained unclear late Friday. The deal's proponents said the new plan would cut spending for an array of projects, such as $870 million for pandemic flu preparedness, included in the earlier House and Senate bills.

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Republican Sens. Arlen Specter of Pennsylvania and Susan Collins of Maine, who helped craft the less-costly stimulus plan with a bipartisan group of moderate senators, board an elevator at the Capitol Friday after a meeting where they bargained with Democratic Leader Harry Reid.
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Republican Sens. Arlen Specter of Pennsylvania and Susan Collins of Maine, who helped craft the less-costly stimulus plan with a bipartisan group of moderate senators, board an elevator at the Capitol Friday after a meeting where they bargained with Democratic Leader Harry Reid.
Republican Sens. Arlen Specter of Pennsylvania and Susan Collins of Maine, who helped craft the less-costly stimulus plan with a bipartisan group of moderate senators, board an elevator at the Capitol Friday after a meeting where they bargained with Democratic Leader Harry Reid.
Republican Sens. Arlen Specter of Pennsylvania and Susan Collins of Maine, who helped craft the less-costly stimulus plan with a bipartisan group of moderate senators, board an elevator at the Capitol Friday after a meeting where they bargained with Democratic Leader Harry Reid.

The compromise didn't sway some Republican opponents. Among those criticizing the stimulus plan – Sen. John McCain, (R-Ariz.), the losing Republican Presidential candidate. "This is a Christmas tree," Mr. McCain thundered.

The deal jettisons or pares back a number of items that President Barack Obama had wanted. Funding to computerize health records is all but gone, as is a national study on the comparative effectiveness of health treatments. Mr. Obama's Make Work Pay payroll tax holiday was clipped back, and an expansion of the per child tax credit for the working poor was also trimmed. At least half the funds to stop cutbacks at the state level in education were eliminated.

White House aides refused to call those cuts a defeat for the president. Instead, one called it "a strategic retreat" to get the bill into House-Senate negotiations and off the Senate floor where it was being picked apart.

"Wait til conference," another White House aide cautioned. The reference was to the House-Senate conference that will shape the final bill.

The compromise package makes some $20 billion to $25 billion in trims from the tax-relief elements of the earlier Senate package. Under the package, the cuts would fall on planned investments in Medicaid, the federal-state program that provides health to the poor, housing, energy and education. But proponents said it would still offer tax relief for low and middle income families, breaks for small businesses, and a one year patch to protect millions of Americans from paying the alternative minimum tax.

With Republicans and Democrats in the Senate still at loggerheads over an economic stimulus package, President Barack Obama expressed frustration at the GOP's demands to cut spending and focus on tax cuts in the bill.

Sen. Max Baucus (D-Mont.) said the decision to scale back the tax cuts reflected "push back from the left," which insisted that all of the reductions in the package not come from spending. One Senate aide said some of the reductions in tax relief would come from trimming a tax cut that would promote development of clean energy, as well as money-losing firms by allowing them to get refunds for taxes paid in past years.

Still unclear is what the Senate will do with popular tax breaks -- for home and auto purchases -- that received wide support on the Senate floor. Some senators suggested those provisions would still remain in play, as efforts to meld the House and Senate bills begin.

Even a scaled-down Senate package, if passed, would likely be broadly consistent with the House-passed bill, and well within the range of what Mr. Obama originally called upon Congress to approve.

The new plan would still provide an array of tax cuts for individuals and business, aid to cash-strapped states, and billions of dollars in new spending, boosting support for jobless benefits, food aid for the poor, and road and bridge construction, among other things.

If the Senate passes a plan, it would set up private House-Senate negotiations, which are expected to begin next week. That will be where Mr. Obama and senior Democrats could exert far more influence on the details of the final package, amid efforts to conclude action by the end of the week.

Senate passage would be a critical victory for Mr. Obama, a little more than two weeks into his term. The past three days have strained Mr. Obama's efforts to shape a post-partisan presidency that leaves behind decades-old ideological debates. The stimulus debate has highlighted the reality that President Obama faces: a smaller but more vociferously conservative Republican Party and a liberal Democratic leadership anxious to put its large majorities to work passing long-deferred priorities.
[Harry Reid]

Harry Reid

Senate Majority leader Harry Reid, in his effort to round up the votes to push the measure through, bargained for much of Friday with Republican Maine Sens. Susan Collins and Olympia Snowe, and Arlen Specter (R., Pa.), who all played key roles in developing a bipartisan alternative to the Obama plan. Working in concert with a group of moderate Democrats led by Sen. Ben Nelson of Nebraska, Sen. Collins and others proposed to cut tens of billions of dollars from the original Senate bill, with the goal of snipping out projects -- from education funding to spending on polar ice breakers -- not deemed of immediate benefit to the economy.

Mr. Obama spoke with Mr. Reid in the wee hours of Friday, and again Friday morning. White House Chief of Staff Rahm Emanuel worked the phones with Democratic leadership all day. White House budget director Peter Orszag ran through the spending and tax totals with lawmakers, while the president's legislative staff buzzed in and out of Senate meetings.

The delays in Senate action on the economic-stimulus plan provoked sharp criticism from Mr. Obama, who seized on the bleak jobs report to blast the Senate's inaction.

"These numbers demand action," Mr. Obama said early Friday, as he announced the creation of an outside advisory board on economic policy. "It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay and politics, while millions of Americans are being put out of work."

After a closed-door caucus of Senate Democrats, party leaders emerged saying they are ready to go to the floor. "We have a deal," said Mr. Baucus, the Senate Finance Chairman.

Unclear, though, was whether the full Senate would push immediately toward a final vote Friday night. Mr. Reid, the majority leader, said he wanted to vote on more amendments to the plan Friday night, but it was unclear whether Mr. Reid could get a final vote Friday. Mr. Reid said the Senate would vote "if not tonight…then in next day or so."

The push for action reflected the sense of renewed urgency among lawmakers over the deepening recession.
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To ratchet up the political pressure on lawmakers, who must still reconcile the House and Senate versions of the bill, the president will make his first foray Monday out of the Washington area since his inauguration, to a town-hall meeting in Elkhart, Ind., where the jobless rate in the last year has soared to 15.3% from 4.7%, White House Press Secretary Robert Gibbs announced Friday. Following a Monday night press conference on primetime television, he will head to Fort Myers, Fla., another hard-hit city, to sell the package on Tuesday.

Mr. Reid had to compromise to win the handful of Republicans he needs to swing behind the president's plan and pass the bill. Democrats control the chamber with a 58-41 majority. But they need Republican support to achieve the 60 votes needed to ensure passage of any measure.

Two Republican senators -- Susan Collins of Maine and Arlen Specter of Pennsylvania -- endorsed the package, Friday night.

Massachusetts Sen. Edward Kennedy, who has been ill, was flying back to Washington Friday night to bolster the vote for the plan.

But Senate minority leader Mitch McConnell, (R-Ky.) Friday night criticized the compromise plan, and said the plan is "not likely…to produce the results we desire."

The tenacity of the Republicans' opposition to the stimulus plan in the House and Senate has appeared to catch the Obama administration off balance.

"In the political hurly-burly, we've lost contact with the basic economic concepts here: States are trying to balance their budgets, and they are raising taxes, cutting benefits and laying people off," a White House economist said. The economist said the education cuts under discussion Friday were unacceptable.