Moderate Democrats, GOP forge deal to trim $100 billion from stimulus bill; passage now likely

By ANDREW TAYLOR Associated Press Writer

Feb 7, 2009, 8:06 AM EST

WASHINGTON (AP) --

President Barack Obama's economic recovery plan is on track to pass the Senate after a handful of moderate Republicans and Democrats forced more than $100 billion in cuts in programs that wouldn't create many jobs right away.

But the group backed away from a confrontation that threatened to kill the legislation altogether after White House Chief of Staff Rahm Emanuel weighed in to urge Democrats make a final round of concessions.

Architects of the compromise included Susan Collins, R-Maine, and Ben Nelson, D-Neb., who represented a broader group of moderates unhappy that so much money went into programs they thought wouldn't create jobs. Eventually, every Republican except Collins and Arlen Specter, R-Pa., left the talks, which finally produced a deal with the White House late Friday afternoon.

While ensuring passage of Obama's plan in the Senate within a few days, the deal sets up difficult negotiations with the House.

Officials put the cost of the bill at $827 billion, including Obama's signature tax cut of up to $1,000 for working couples. Also included is a tax credit of up to $15,000 for homebuyers and smaller breaks for people buying new cars. Much of the new spending would be for victims of the recession, in the form of unemployment compensation, health care and food stamps.

In a key reduction from the bill that reached the Senate floor earlier in the week, $40 billion would be cut from a "fiscal stabilization fund" for state governments, though $14 billion to boost the maximum for college Pell Grants by $400 to $5,250 would be preserved, as would aid to local school districts for the No Child Left Behind law and special education.

A plan to help the unemployed purchase health insurance would be reduced to a 50 percent subsidy instead of two-thirds.

Senate Majority Leader Harry Reid, D-Nev., who had sought Friday to cut just $63 billion in spending from the bill, throwing a monkey wrench into the talks, called it an imperfect compromise. He warmly praised it nonetheless.

"But at the end of the day, we are passing a bold and responsible plan that will help our economy get back on its feet, put people to work and put more money in their pockets," Reid said.

Despite a 58-41 majority bolstered by the elections, Democrats need 60 votes to clear a key procedural hurdle on Monday and advance the bill to a final vote.

In addition to Collins and Specter, Republican Sen. Olympia Snowe of Maine pledged to vote for the legislation.

The end-stage negotiations played out against a backdrop of yet another dismal jobs report - 598,000 jobs lost in January and the national unemployment rate rising to 7.6 percent.

At its core, the legislation is designed to ease the worst economic recession in generations, and combines hundreds of billions of dollars in spending to boost consumption by the public sector, along with tax cuts designed to increase consumer spending.

States would get large sums aimed at forestalling cuts in services or tax increases.

Much of the money would go for victims of the recession in the form of food stamps, unemployment compensation and health care. There is money, as well, for construction of highways and bridges.

It's hoped that the combined effort would work its way into the economy and save or create 3 million jobs or so to begin to ease the nation out of the recession by the end of this year.

Obama: Economic bill necessary to save jobs

By PHILIP ELLIOTT Associated Press Writer

WASHINGTON (AP) --

With the Senate moving toward a tenuous compromise on the White House's economic stimulus plan, President Barack Obama hammered at the urgent need to pass a bill that will jump-start the struggling economy and put people back to work.

"Americans across this country are struggling, and they are watching to see if we're equal to the task before us. Let's show them that we are. And let's do whatever it takes to keep the promise of America alive in our time," Obama said Saturday in his weekly radio and Internet address.

Obama made an aggressive push for House and Senate lawmakers to work quickly to resolve their differences in an economic bill whose pricetag has swung from $720 billion upward toward a trillion dollars. The new president had hoped to sign economic legislation on his first day in office, but instead has spent his first three weeks in office wrangling with a reluctant Congress - including fellow Democrats - to heed his leadership.

Obama inched closer to a completed economic bill, as lawmakers sought to put their own stamp on the legislation. The House - without a single Republican vote - passed an $819 billion bill that gave many moderates pause for its size and scope.

Senate leaders went to work paring down that bill, working late into Friday to produce a $780 billion version. A vote on the measure could come as soon as Monday.

Most Republicans still looked at the bill skeptically, with only two publicly signing onto the proposal.

Sen. John McCain, Obama's Republican opponent in last November's election, mocked the bill and said lawmakers could call it many things, "but 'bipartisan' is not one of them."

Obama and his advisers have grown more assertive in recent days, reminding Democrats that voters gave them the White House, the House and the Senate to bring change, not partisan gamesmanship.

"In the midst of our greatest economic crisis since the Great Depression, the American people were hoping that Congress would begin to confront the great challenges we face," Obama said in the address, released before he made his first trip to Camp David, the presidential retreat in the Maryland mountains.

"That was, after all, what last November's election was all about."

Republicans characterized Obama's rhetoric as arrogant.

"Democrats have controlled both branches of government for less than a month. And you have to wonder if all that power has gone to their heads," Republican National Committee Chairman Michael Steele said in the GOP's weekly address. "For the last two weeks, they've been trying to force a massive spending bill through Congress under the guise of economic relief."

The economic bill is the first legislative test of his presidency, one his top aides have worked to turn into a victory. But Obama has found it increasingly difficult to manage the liberal wing of his party, which wanted more money directed to infrastructure, governors who wanted more money allocated to help patch their thin budgets and moderate members of his own party.

He also sought to bring Republicans into the mix, pledging to listen to them, praising the late-Friday negotiations.

Obama said that "by the evening, Democrats and Republicans came together in the Senate and responded appropriately to the urgency this moment demands."

GOP leaders, however, said the rhetoric didn't match what was written.

"Republicans stand ready to work with reasonable Democrats to do what is right for America," Steele said in his first address as chairman of his party. "But it will take more than bipartisan words from the president. It will require fair-minded action from Democrats in Congress."

Republicans have pushed for the bill to include more tax cuts and less spending.

The Senate's top Republican took the floor of the Senate to oppose the measure.

"Now, if most Republicans were convinced that this would work, there might be a greater willingness to support it," Sen. Mitch McConnell of Kentucky said. "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."

Obama acknowledged the bill was far from perfect but said it would be too dangerous to leave it lifeless on the table.

"Legislation of such magnitude deserves the scrutiny that it's received over the last month, and it will receive more in the days to come," Obama said. "But we can't afford to make perfect the enemy of the absolutely necessary. The scale and scope of this plan is right. And the time for action is now."