Senate forges deal on $820 billion stimulus

Key elements of the plan include a tax cut of up to $1,000 for working couples and $88 billion in new funding for education.

Jonathan Ernst/Reuters
Sen. Ben Nelson (D), right, arrives with Sens. Joe Lieberman (I), center, and Evan Bayh (D), left, to meet with the rest of Democratic caucus about a compromise deal on President Barack Obama's economic stimulus bill at the US Capitol in Washington on Friday.

Senate negotiators struck a $780 billion deal on Friday that eases the path for a massive economic recovery program. With amendments, the plan comes to $820 billion -- just $1 billion more than the plan passed by the House late last month, but it differs in several respects.

The bipartisan compromise, endorsed by three Republican senators, gives President Obama a bare working majority in the Senate. If all Democrats back the plan, as expected, those three Republican votes are just enough to ensure a win, despite strong GOP opposition.

Key elements of the plan, which cover a vast range of federal spending, include: $116 billion in infrastructure improvements; $88 billion in new funding for education; $40 billion for the development of clean energy; $23 billion for programs to help those most hurt by the economic downturn; and $14 billion for healthcare, including $3 billion to jump-start a plan to computerize health records.

The plan includes a tax cut of up to $1,000 for working couples. An amendment adopted this week would add a tax credit of $15,000 for home purchases.

Under the terms of the deal, Senate Democrats agreed to cut some $100 billion from their original proposal. Spending for the states and education took the biggest hit, compared with the House bill. State fiscal stabilization funding was cut back $40 billion, school construction dropped $16 billion, and a proposed $3.5 billion line for higher education construction was zeroed out.

The plan also lopped some $25 billion from $275 billion in proposed new tax relief.

But even with the trims, the plan would top $1 trillion after interest costs are added in. That's equivalent to all the discretionary spending in a typical federal budget year, ­ the product of months of hearings and votes. This plan came together in just a few weeks.

"The enormity of the legislation before us today can hardly be comprehended," said Sen. Jeff Sessions (R) of Alabama in floor debate on Friday.

The compromise deal was announced just hours after the release of new unemployment figures showing 598,000 jobs lost in January. (Click here for a look at how job cuts are spreading through the economy.)

"The situation could not be more serious. These numbers demand action," said President Obama, after Friday morning's job numbers were released. "It is inexcusable and irresponsible to get bogged down in distraction and delay while millions of Americans are being put out of work. It is time for Congress to act."

Bipartisan negotiators, led by Sens. Ben Nelson (D) of Nebraska and Susan Collins (R) of Maine, began work on Monday. At any one time, the group involved 20 senators including up to eight Republicans. Talk focused on how to reduce the size of the plan, which had grown to $920 billion in the Senate. Negotiators also aimed to cut new programs that were not targeted to create jobs or would permanently expand the size of government.

"For some people, the top number was not as important as temporary [measures], and for others the top number was very important," says Senator Nelson. "This was the mechanism to get 60 plus votes. There wasn't any other way to do it."

A key dispute was over the size and scope of the final package. Even the negotiators were often hundreds of billions of dollars apart. Early in the negotiations, Senator Collins was proposing a $620 billion recovery plan, but said she was convinced after meeting with President Obama that more stimulus was needed to get the economy back on track.

"This actually cuts over 20 percent of the money recommended for spending by the [Senate] Appropriations Committee. But it comes very close to the $800 billion that President Obama has quite rightly said this country needs to make this stimulus work," said Sen. Joseph Lieberman (I) of
Connecticut, one of the negotiators.

The White House was deeply involved in moving a compromise bill through the Senate. The president spoke frequently with key senators on both sides of the aisle, and Chief of Staff Rahm Emanuel came to a Democratic caucus meeting on Friday to endorse the deal.

Meanwhile, Senate Republicans --­ left out of the final negotiations as a consequence of the defection of three of their members ­-- are opposing the package. The House version of the stimulus deal passed without a single GOP vote.

"Now, if most Republicans were convinced that this would work, there might be a greater willingness to support it," said Senate Republican leader Mitch McConnell on the floor of the Senate after announcement of the deal. "But all the historical evidence suggests that it's highly unlikely to work. And so, you have to balance the likelihood of success versus the crushing debt that we're levying on the backs of our children, our grandchildren, and, yes, their children."

Even before the Senate moves on a final version of this legislation, Democrats say that negotiations between the House and Senate over those differences are already on track.

"As a result of the Senate action, we are closer to moving to a conference committee that will finalize legislation President Obama will sign," said House Speaker Nancy Pelosi, in a statement after announcement of the Senate deal.

"Despite differences between the House and Senate versions, Congress is committed to sending the President legislation to create or save over 3 million jobs and begin to put our country back on the road to recovery," she added.

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