Stimulus ideas split by party philosophy

Democrats draw up proposal

GOP makes counterproposal

January 24, 2009|By Maura Reynolds | Maura Reynolds,Tribune Washington Bureau

WASHINGTON - President Barack Obama's economic powwow with congressional leaders yesterday ended on an optimistic note, with senior Republicans sounding less confrontational than they had in recent days.

But GOP leaders still released a counterproposal to Democrats' $825 billion economic stimulus package that suggested the gulf separating the two parties on economic policy might have narrowed but has not closed.

If the parties fail to find common ground, Obama might have to choose between compromising some features of his economic strategy and pursuing his goal of bipartisan unity in the face of deepening economic crisis.

Leaders of both parties said they expected their differences to be resolved, and the House could vote on the stimulus as early as Wednesday. And White House press spokesman Robert Gibbs said the president would "go to Capitol Hill the beginning of next week to talk to the Republican caucuses and solicit their input and their ideas."

"Truly, the president was leading us to be united, not divided," said Senate Majority Leader Harry Reid of Nevada.

"The administration strikes me as open to our suggestions, and we made a number of them," said Senate Minority Leader Mitch McConnell of Kentucky.

The Democratic plan, developed by House Democrats and Obama aides, emphasizes stimulating economic demand with fast-acting tax breaks for workers and businesses, creating jobs through direct government spending on infrastructure and other projects, and investing in energy and the environment to promote long-term growth.

It includes roughly $550 billion in spending programs and $275 billion in tax breaks.

The Republican approach, on the other hand, emphasizes the party's traditional stance: broad cuts in income and business taxes, and no additional government spending. Republicans did not estimate how much their plan would cost.

"Obviously, we're Republicans. We're got ideas that lowering tax rates and allowing people to keep more of what they earn will allow them to spend that money, invest that money, or save it - all of which are good for the economy," said House Minority Leader Rep. John A. Boehner of Ohio.

GOP leaders indicated that even if they can't sign on to the Democrats' plan, they would not try to block the stimulus package altogether.

"I do think we'll be able to meet the president's deadline of getting the package to him by mid-February," McConnell said.

What's not clear is whether that means Congress will deliver the package with enough Republican votes to achieve Obama's goal of demonstrating that a new era of bipartisan cooperation is at hand.

"I know that it is a heavy lift to do something as substantial as we're doing right now," the president said as he opened the meeting. "I recognize that there are still some differences around the table and between the administration and members of Congress about particular details on the plan.

"But what I think unifies this group is a recognition that we are experiencing an unprecedented, perhaps, economic crisis that has to be dealt with, and dealt with rapidly."

Republicans have voiced concerns that Obama's plan would spend the stimulus money too slowly to have much effect on the declining economy.

But in a letter to Congress, Obama budget director Peter Orzag insisted yesterday that 75 percent of the stimulus package would be spent in 18 months.

"Our analysis of the legislation right now is that 75 percent of this money will be spent in the next 18 months, to create jobs and to get people working and to get the economy moving again," said Gibbs. "Absolutely, it's stimulative. It puts money back in people's pockets that we believe they'll spend and help the economy."

Obama has proposed a $500-per-worker tax break that would come as a reduction in payroll taxes, a deduction every worker pays. He has described it was the first stage of the middle-class tax cut he promised during his campaign that would go to families with less than $250,000 in annual income. Because the payroll tax cut could be implemented quickly, Obama's team is hoping it will help stimulate economic demand in short order.

The Republican counterproposal centers on a reduction of the two lowest marginal tax brackets - the 10 percent bracket for the first $8,350 in income and 15 percent for the first $33,950.

That means everyone who owes taxes would get roughly a $500 tax cut, or $1,000 for a married couple. There would be no phase-out for higher-income earners, so all taxpayers would get the same benefit.

Democrats argue that the GOP approach does nothing to help Americans who don't owe taxes - such as low-income workers and Social Security recipients. About 40 million Americans file tax returns but have too little income to pay any taxes.

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