House unveils stimulus package

$550 billion in spending, $275 billion in tax cuts sought

January 16, 2009|By Janet Hook and Jim Puzzanghera | Janet Hook and Jim Puzzanghera,Tribune Washington Bureau

WASHINGTON - Launching an initiative that could be the cornerstone of Barack Obama's presidency, House Democrats unveiled yesterday an $825 billion spending and tax-cut plan to shore up the crippled economy he inherits on Inauguration Day.

The bill, which Democratic leaders hope to enact by mid-February, includes $550 billion for spending on infrastructure, science, energy and education programs over two years, and $275 billion for tax cuts for individuals and businesses.

Rep. David R. Obey, a Wisconsin Democrat and chairman of the House Appropriations Committee, called it "the largest effort by any legislative body on the planet to try to take government action to prevent economic catastrophe."

Meanwhile, two days after Obama personally lobbied for release of $350 billion in bailout funds, the Senate narrowly turned aside a bid to block the money.

Across the Capitol, Speaker Nancy Pelosi, a California Democrat said, "Immediate job creation and then continuing job creation" were the twin goals of the separate stimulus legislation. It recommends tax cuts for businesses and individuals while pouring billions of dollars into areas such as health care, education, energy and highway construction.

She and Senate Majority Leader Harry Reid, a Nevada Democrat, have pledged to have the economic stimulus package ready for Obama's signature by mid-February.

Both houses debated Obama's call to release the second $350 billion from the financial bailout package, but the Senate vote was the triumph he had sought. Despite bipartisan anger over the Bush administration's handling of the bailout, Democratic allies of the incoming president prevailed on a 52-42 roll call.

The vote followed a commitment by Obama to use up to $100 billion of the funds to help homeowners facing foreclosure. The money will be available in less than two weeks

The $825 billion stimulus measure includes a smaller tax cut and more spending than Obama had proposed - a signal that Democrats in Congress are less inclined to offer an olive branch to Republicans who want the plan more weighted toward tax cuts. Some House Democrats complained in closed-door discussions that the bill still includes too much in tax cuts and too little in infrastructure spending.

Republicans suggested that the package includes items that are not effective stimulus measures.

"This legislation appears to blanket government programs in spending with little thought toward real economic results, job creation, or respect for the taxpayer," said Rep. Jerry Lewis of California, the ranking Republican on the House Appropriations Committee.

Republicans questioned the inclusion of funding for such programs as the National Endowment for the Arts, $850 million for wildfire prevention and $600 million for new cars for the federal government. Those are a far cry from the traditional tools of stimulating the economy such as road and bridge construction, for which the bill allots $30 billion. Their inclusion reflects Democrats' expansive view of how the government can create jobs: helping the auto industry, for example, by replacing government cars and hiring people to restore areas hit by wildfires.

The drafting of this first major initiative of the Obama administration provides a glimpse of how the new president will be dealing with Democrats in Congress. He has approached them in a collaborative spirit, not the kind of top-down leadership that hurt President Bill Clinton when he presented a health care plan drafted with little input from Congress.

Obama, in contrast, laid out broad outlines and principles for the economy, and worked with Democratic lawmakers to flesh out the details. When Democrats criticized one of his proposed tax cuts for employers, he backed down. He wanted to spend less than congressional Democrats, but did not go to the mat over it.

"This plan is a significant down payment on our most urgent challenges," Obama said after the House proposal was unveiled.

The goal is for the House to vote on the bill by Jan. 28 and then send it to the Senate, where changes might be made that would raise the price tag. One possibility is a popular but costly measure to prevent upper-middle-class taxpayers from incurring a tax increase under the alternative minimum tax. That parallel tax system was established to ensure that the wealthy do not shelter all their income, but the system increasingly has hit less-than-wealthy families.

That $70 billion tax break was to have been in the House proposal but was dropped in the face of objections from fiscally conservative Democrats who thought it would do little to stimulate the economy.

The House bill focused on five main areas: tax cuts for middle-class families; creating jobs through investment in infrastructure; assisting people who have lost their jobs or health insurance; modernizing and reforming the economy; and assisting state and local governments to keep them from having to make further cuts in education and health care. The bill includes about $318 billion for state and local governments and nonprofit organizations for things such as education and health care.

The Associated Press contributed to this article.

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