Why the stimulus stalled out (hint: 2002) Congress

Sides in Congress dug in heels over issues that set stage for next election.

After all the cries for cooperation, the weekend negotiations, the walkouts, the end runs, the 11th-hour near-deals, Washington's effort to come up with a compromise to revive the economy derailed over an implacable fact: When the political stakes are high enough, sometimes nothing is better than something.

Now the recriminations begin - not merely as an in-the-Beltway blame game but as a foundation of the 2002 election campaign.

The impasse over how to help the economy will also help set the tone and the agenda for the second year of the 107th Congress.

Despite a significant shift toward middle ground by the House Republican leadership - and a rare Capitol appearance by President Bush - Senate majority leader Tom Daschle says that a $214 billion GOP stimulus plan is still a bridge too far for Democrats.

"We have to draw a distinction between passing something and passing anything," said Senator Daschle, at a Monitor breakfast yesterday. "There is nothing that divides our parties more than economic policy. It's the basis of identity in our two-party system." (More news from the breakfast, page 16.)

But the Senate Democratic leader is already taking heat for this position. White House officials are dubbing Daschle "obstructionist," a charge that could carry weight with the American public at a time when the president's popularity is hovering above 80 percent.

The economy is also a top priority for Americans, outranking antiterror efforts in some recent polls. Many also show stronger support for President Bush on the economy than for congressional Democrats.

In an NBC/Wall Street Journal poll earlier this month, 59 percent of those surveyed said that tax cuts to business would do more to encourage investment and create jobs than unemployment benefits and consumer-spending incentives.

"Right now, Democrats are being blamed for this failure to pass a stimulus plan. Daschle is giving the Republicans a little ammunition to use against him," says Jennifer Duffy, a congressional analyst with the Cook Political Report, citing private polls.

Early on, House Republicans pulled out of bipartisan talks on a stimulus package to push their own plan, which heavily emphasized tax cuts to business.

Business groups missed out on the first Bush tax cut last spring, and have been lobbying hard to be included in any subsequent tax cuts. GOP leaders saw the stimulus package as a means to do that.

For Democrats, the key priority was to extend unemployment insurance and health benefits to the nearly 1 million workers who have lost their jobs since the Sept. 11 attacks.

The toughest impasse in the stimulus plan was over healthcare issues, which have been a stumbling block in the Congress for years. Republicans proposed a new tax credit to help laid-off workers purchase health insurance. Democrats wanted to use federal dollars to help workers maintain the health coverage they had when they were working, as well as to beef up Medicaid.

The standoff on healthcare in the stimulus debate could be a template for the expected battle next year over providing a prescription-drug benefit to seniors. Democrats want to achieve this through Medicare. Republicans are urging a solution that uses market incentives.

In the final hours of this session, centrists pushed hard for a compromise proposal that went further than any of the Republican plans to meet the needs of workers. The hastily crafted bill passed the House on a vote of 224-193 Wednesday night, but Democrats were already declaring the centrist measure dead on arrival in the Senate.

In a closely divided Senate, 60 votes are needed to avoid a filibuster and pass controversial legislation. By even the most optimistic count, the centrist compromise never won the support of more than 55 senators.

Moreover, with some economists predicting that the economy could begin moving out of recession in a few months, some members of both parties suggest that failing to spend billions on stimulus may not be a bad thing. "It's now about 50-50 for me as to whether it's already too late [for a stimulus plan]," says Sen. Olympia Snowe (R) of Maine, a sponsor of the centrist compromise.

Nonetheless, the political fallout from this fight is already setting up some major themes for the next election campaign.

"I cannot begin to tell you the utter contempt in which unemployed workers have been held in this conference," says Rep. Charles Rangel (D) of New York, citing an unnamed GOP negotiator as saying that unemployed workers were "unproductive."

"What we're seeing now [are] some issues that will not be resolved on purpose, so they can be used in the campaign," says James Thurber, a congressional expert at American University.

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