House and Senate negotiators settled Wednesday on a $789 billion package of tax cuts and new federal spending meant to save the US economy from a deep recession, or worse.
The agreement, coming 26 hours after the Senate approved its version of the stimulus bill, now heads for up-or-down votes in the House and Senate.
The final plan expends $20 billion less than the House's original version and $39 billion less than the Senate's. Tax cuts for workers, including those who don't earn enough to pay income taxes, still make up about one-third of the overall expenditure.
Senate majority leader Harry Reid, in announcing the deal, said the package would create 3.5 million jobs – more than the Senate bill and at less cost than the House bill.
Most of the $789 billion would flow into the economy during the next two years, though some would take 10 years to filter out to recipients. Economists debate whether that is soon enough to bring the economy out of its tailspin, though many agree the federal government has become the consumer of last resort and must act.
The deal followed intense, tough negotiations involving key House and Senate Democrats, the White House, and three Republican senators, whose votes are critical for passing the bill in the Senate.
“I’m pleased to announce we’ve been able to bridge those differences,” said Senator Reid, who, in an unusual move, named himself one of the conferees.
One key issue was settling on a top line. President Obama had asked Congress to pass a stimulus plan of about $800 billion. The House bill came in at $819 billion; the Senate’s version maxed out at $838 billion.
But with the swing votes to make or break the deal, the three GOP senators held the final bill to less than $800 billion. In the end, the compromise struck last Friday by a bipartisan group of moderates led by Sens. Susan Collins (R) of Maine and Ben Nelson (D) of Nebraska set the template for the final agreement.
“We hung tough, and it was modified only in the case of absolute necessity,” said Sen. Arlen Specter (R) of Pennsylvania, who along with Senator Collins and Sen. Olympia Snowe of Maine gave the bill its only GOP votes in the Senate.
GOP moderates insist this new government spending is only temporary. Beneficiaries of the new federal spending include the following.
• States will get at least $54 billion in aid to stabilize their own wobbly budgetary positions. They will have latitude – but not complete freedom – in deciding how to spend the money. Using it to repair and modernize schools, for instance, is permitted, but building new schools is not.
• People who lose their jobs will be eligible for extended unemployment benefits and help with health insurance coverage, and the food stamp program will be expanded. In a nod to the House, Senate negotiators agreed to a $90 billion increase in the federal match for Medicaid, as a temporary option for unemployed workers.
• Workers will see their income taxes cut, but details were still being worked out at time of writing. In addition, middle-income families who might have been hit by the alternative minimum tax this year will be able to avoid it, thanks to a $69 billion patch included in the final bill.
•School districts can expect $11.5 billion in additional special-education funding through the Individuals With Disabilities Education Act and $10 billion in new money for serving disadvantaged students. For low-income college students, there's an increase in the maximum Pell Grant of $281 per pupil in 2009-10 and $400 in 2010-11.
The agreement cuts back, but still includes, a tax credit for home purchases for a year after enactment of the law. It also includes an above-the-line deduction for purchases of new automobiles.