The emerging stimulus bill: still big

Even before the Senate approves an economic recovery package, House and Senate leaders are thrashing out a joint version of a stimulus bill of unprecedented size and scope.

One issue is all but resolved: The legislation will come in close to the $820 billion that President Obama says is needed.

What’s left is how to spend it, and the House and Senate versions of the bill diverge markedly in some areas, especially aid to the states, healthcare, education, energy, and tax policy.

In his weekly radio address, Mr. Obama emphasized the need for speed. He’s expected to hit that point again Monday during a visit to Elkhart, Ind., where unemployment now tops 15 percent, and in a prime-time televised press conference.

“We can’t afford to make [the] perfect the enemy of the absolutely necessary. The scale and scope of this plan is right. And the time for action is now,” he said Saturday.

In the Senate, Friday’s deal between Democrats and three GOP moderates brings a bill that had ballooned to $920 billion back in the president’s target range. The House bill, approved Jan. 28, came in at $819 billion. A Senate vote is expected Tuesday.

The plan, negotiated by Sens. Ben Nelson (D) of Nebraska and Susan Collins (R) of Maine, cut $110 billion from the base Senate version of the bill.

The $827 billion bill won the support of three GOP senators – Senator Collins, Sen. Olympia Snowe of Maine, and Sen. Arlen Specter of Pennsylvania – whose votes give Democrats the 60 they need to avoid a filibuster. (With one recount pending, Democrats have 58 senators in their caucus, including two independents.)

That close margin could give Senate Democrats extra leverage in negotiations with the House over the legislation’s final shape. The House bill passed 244 to 188, without a single Republican vote.

Collins has already made clear the tenuousness of her support.

“I, for one, have made no commitments for supporting a conference report, because I don’t know what’s going to come out of conference,” she said at a Friday briefing. “If a lot of the House expenditures that I viewed as wasteful are put back in by the conference committee, then I will feel compelled to vote against the conference report.”

Spending for states in dispute

To produce a final bill, House and Senate negotiators must resolve differences on both the spending and tax sides. One big disparity is over new funding to the states.

The House bill sets up a $79 billion fiscal stabilization fund to help states avoid sizable layoffs and cuts in services, especially in public education. In the Senate, the deal with GOP moderates calls for cutting $40 billion out of that funding stream, reducing it to $39 billion.

That funding specifically affects schoolteachers and their unions – a core constituency for Democrats. It’s a top priority for Rep. George Miller (D) of California, chairman of the House Education and Labor Committee and a key ally of House Speaker Nancy Pelosi. Without an infusion of new federal dollars, Representative Miller warns, big budget shortfalls will force school districts to make dramatic layoffs that risk “the collapse of our elementary and secondary education system.”

Under both bills, funding would increase for Pell Grants for low-income college students. But the Senate bill would max out new funding at $13.9 billion; the House wants an additional $15.6 billion.

The Nelson-Collins deal also provides $16 billion less for school construction than does the House package, and it zeroes out $3.5 billion for higher education construction. It also allots $1 billion less for early childhood education and $600 million less in new funding for schools in lower-income neighborhoods.

On Sunday, top White House economic aide Lawrence Summers described education funding in the House version of the stimulus plan as “critical.” He urged lawmakers to resolve their differences quickly and help state and local governments cope with a fiscal crisis.

“There’s no question that what we’ve got to do is go after support for education, and there are huge problems facing state and local governments – and that could lead to a vicious cycle of layoffs, falling home values, lower property values, more layoffs, and we’ve got to prevent that,” he said on ABC’s “This Week.”

Regarding healthcare, the House bill provides $13 billion to allow states to expand Medicaid to cover the unemployed through 2010, along with $87 billion to boost state Medicaid programs. The Senate version does not expand coverage for the unemployed and changes the formula for distributing the funds to favor rural states.

That urban-rural fight, a perennial one between the House and Senate, is likely to be a flash point in conference talks. The House bill reserves 50 percent of total new healthcare spending for states that have lost the most jobs, such as California and Michigan. The Senate version lowers that formula to 20 percent.

On energy policy, the House bill includes $18.5 billion for research and development on renewable energy and energy efficiency, and $8 billion in loan guarantees for renewable-energy projects. The Senate bill, as likely to be amended by the bipartisan deal, provides $1 billion less in energy loan guarantees and cuts $3.5 billion in new funds to improve energy efficiency in federal buildings.

Disparity over the size of tax cuts

On the tax front, the Senate Finance Committee, at the urging of ranking Republican Charles Grassley of Iowa, added a $69 billion fix to protect middle-class taxpayers from the alternative minimum tax in 2009. At the time, the White House backed the move. But adopting this provision in the conference report will involve more cuts in the House bill – or raising the total package closer to $900 billion.

The Senate also lowered the income cap for Obama’s middle-class tax cut, meaning fewer Americans would get it. Eligibility for a tax credit of $500 for individuals is $70,000 under the Senate plan and $75,000 under the House’s. For couples to qualify for the full $1,000 tax credit, they can earn no more than $140,000 under the Senate bill versus $150,000 under the House’s.

Senate Democrats say they plan to start resolving the differences even before the Senate votes on the stimulus bill.

“We know the outlines. We know we have 60 votes, given the speeches of Senators Collins and Specter. And we know that our votes are there,” said Sen. Charles Schumer, the Democratic caucus chairman. “To make sure we make the [Feb. 13] deadline, we could begin to talk about it. There wouldn’t be an official conference, but we could begin to feel out the parameters early.”