House braces for second try at financial bailout plan

After the bill failed in the House, Senate negotiators began working on add-ons that could win over enough support in the House to pass on a second vote.

"The FDIC was talked about immediately after the House vote failed," said Sen. Pete Domenici (R) of New Mexico.

But the key new element is the tax package, viewed by both sides of the aisle as must-pass legislation but stymied by disagreements between the House and Senate over how to pay for it.

The package includes repeal for a year of the Alternative Minimum Tax (first drafted to make sure that the superrich pay some income taxes, but now set to hit more than 22 million additional Americans if Congress does not act); disaster relief; a clean-energy tax package; and tax-break extensions, such as the popular research-and-development tax credit, deductions for tuition and education expenses, and deductions for sales tax in states that do not have an income tax.

The glitch is financing. The House has always insisted that the plan be paid for mainly with budgetary offsets – a signature demand of the Blue Dog caucus, a group of fiscally conservative Democrats. The Senate insists that offsets are not necessary for extending expiring tax cuts.

The tax package had passed the Senate by a vote of 93 to 2 on Sept. 23, but House Democratic leaders refused to take it up because it did not offset all new spending and tax cuts. By attaching the package to a rescue plan seen as vital to the health of America’s economy, the Senate is trying to force the House to pass both.

Here’s how: If some House Republicans who opposed the rescue plan on Monday (133 of 198 voted no) are attracted enough by the tax package, they’ll flip their votes. Some Blue Dog Democrats, angered that they now have to swallow new spending that’s not paid for, may drop their support of the bill, but perhaps not by enough numbers to sink it.

Many senators on Wednesday described the vote on a rescue plan for financial markets as the toughest of their career. They, too, are angry at Wall Street for the misdeeds that led to a financial crisis, they said.

“This isn’t a matter of helping Wall Street,” said Sen. Carl Levin (D) of Michigan, after Wednesday’s vote. “It’s a matter of trying to the best of our ability to protect people's pensions and savings, home values and jobs and businesses. That’s what’s at stake here.”

“Don’t expect any ribbons for this one.... If it works, the cataclysmic event won’t happen and you’ll never be given any credit for avoiding a problem,” Sen. Christopher Dodd (D) of Connecticut, who chairs the Senate Banking Committee, told his Democratic colleagues at lunch on Wednesday.

Opponents of the bill said they, too, were torn.

“It was a tough vote for me, but they stacked in so much spending there that pretty soon the concern for increasing the debt limit and the expenses was a problem. I've always been known as a fiscal conservative,” said Wayne Allard (R) of Colorado, one of seven Republican senators who opposed the bill and also face a reelection race in November.

“We are on uncharted water here,” said Sen. Kent Conrad (D) of North Dakota, who chairs the Senate Budget Committee. “We’ve got the chairman of the Federal Reserve telling us that if we don’t do this, 4 million Americans will lose their jobs in the next six months,” he added. “We have got to move forward.”

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