The Hill
Wednesday 23 January 2008
Under pressure from unions, Democrats are pushing for more spending on public works projects and Medicaid to be included in an economic stimulus package being negotiated on Capitol Hill.
This has angered and alarmed congressional Republicans, who are worried that Treasury Secretary Henry Paulson seems too eager to give in to the majority party's demands to get something done.
The worldwide stock sell-off Monday and Tuesday, as well as Paulson's comments Tuesday that a stimulus "must be enacted quickly," heightened those concerns.
But as lawmakers filed back into town, Democratic aides said the global panic was not causing congressional leaders to change their approach to the stimulus negotiations. Instead, they said, the turmoil simply showed the need to embark on an economic rescue mission.
White House spokeswoman Dana Perino indicated President Bush would be "open" to a stimulus package larger than the $150 billion guideline he laid out last week. And Senate Majority Leader Harry Reid (D-Nev.) said the package should be sent to Bush before Feb. 15.
But at the same time, influential GOP senators signaled they remain cool to the idea of injecting cash into the slowing economy.
Sen. Judd Gregg (N.H.), the ranking Republican on the Budget Committee, was skeptical of Bush's plan and warned that it could come at an enormous cost. "That's a big number," he said of package, which is equal to about 1 percent of the economy. "You better get something for it."
Tuesday was filled with meetings on the stimulus package. Paulson met with Bush in the morning, then with congressional leaders around lunchtime. Later on, congressional leaders of both parties met with Bush at the White House where lawmakers agreed that the stimulus package will be worked on first in the House.
"It would be a tremendous message to the American people if a bipartisan package can be sent to us," Reid said.
Leaders declined to give details of what might be included in the massive, fast-moving bill, but they did offer some hints.
It remains unclear whether the $800 tax rebates that have been floated by leaders would include workers who are too poor to pay income tax. At the White House, however, Reid indicated he would push for something aiding lower-income Americans. "We clearly want the American people to benefit, not just one segment of the American people," he said.
But House Minority Leader John Boehner (R-Ohio) said the prospect of sending rebates to people who do not pay income taxes would spark a "vigorous argument." He stopped short, however, of calling it a deal-breaker.
For her part, House Speaker Nancy Pelosi (D-Calif.) said she is open to tax cuts for businesses "to the extent they are stimulative."
Boehner also said he believes $150 billion is "a pretty good number." But Reid suggested he wants to aim for something higher. "If we are legislating today, I think that's a good number. We are not legislating for today."
Some clues have emerged about how the initial talks developed last week.
Aides said Pelosi and Republicans had reached a deal in their meeting Thursday to include rebates and business write-offs, but they initially jettisoned an idea to boost public works spending and give more aid to states for Medicaid.
On Friday, however, the AFL-CIO came out in favor of $30 billion in aid to states for Medicaid and revenue grants, as well as $40 billion in construction spending for ready-to-go projects. AFL-CIO President John Sweeney sent Democratic leaders a letter Friday saying the emphasis on a "timely" stimulus "is no excuse to put our head in the sand and do nothing."
When Democratic aides met Friday to hammer out the details, they said, construction spending and Medicaid were back on the table. Then came Monday's worldwide stock sell-off, and Paulson started urging that a stimulus package be passed as quickly as possible.
AFL-CIO Legislative Director Bill Samuel Tuesday noted that unions are not the only ones pushing for a broader stimulus: "It's basic economics." But Democrats said it was too early to speculate on the state of negotiations.
Referring to the Friday meetings, one senior Democratic aide said only a broad outline was agreed on: "A clear commitment by the leaders to get the job done, [a plan to] continue working on a bipartisan economic stimulus plan, and [the understanding] that nothing would be agreed upon until the whole package is agreed upon."
One sticking point is that conservatives have been leery of Paulson for some time, noting that he has appointed a Democratic fundraiser to a key advisory post and contributed to some Democrats before he became a major Bush fundraiser in 2004.
Gregg said he has aired his concerns about the size of the package with Minority Leader Mitch McConnell (R-Ky.). He also said that giving rebates to workers who pay only Social Security taxes, but not income taxes, is "mind-boggling."
But the idea got a boost from the director of the Congressional Budget Office (CBO), Peter Orszag, who told the Senate Finance Committee Tuesday that weighting tax relief to poorer families would increase the strength of the stimulus.
Chairman Max Baucus (D-Mont.) also asked Orszag about the merits of issuing rebates of $400 to individuals and $800 to families, and bonuses to families of $400 per child. Orszag replied that the approach might have a greater impact as long as the bonuses are also available to families who do not pay income taxes.
The CBO director added that boosting transfer payments, such as unemployment benefits and food stamps, would be a fast way to help people. He warned that the IRS likely would not be able to issue rebate checks until May or June at the earliest.
Orszag said that the so-called "bonus depreciation," which was used in 2002 and 2003 to allow companies to write off equipment purchases more quickly, was "somewhat disappointing" in terms of its impact.
Sen. Arlen Specter (R-Pa.) introduced two bills on Tuesday to reinstate bonus depreciation and to allow companies in some sectors to expense right away the full cost of certain new equipment.
Meanwhile, Sen. Chuck Grassley (R-Iowa), the panel's top Republican, warned that stimulus legislation may not be worth its cost over the long run. But he nonetheless signaled that he would work with Democrats to craft a package.
"The fiscal stimulus horse has left the barn," he said. "I'd prefer the horse be a thoroughbred and not a sway-back."
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Manu Raju contributed to this report.
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