US recovery package clears key Senate hurdle


Posted at Feb 10 2009 08:17 AM | Updated as of Feb 10 2009 04:17 PM

WASHINGTON – The US Senate on Monday moved a step closer toward approving President Barack Obama's plan to jolt the US economy out of recession with government spending and tax breaks, setting up a vote to pass the $838 billion emergency package on Tuesday.

After a week of contentious debate, senators reached a deal to pare down the stimulus bill by about $100 billion and voted 61-36, with minimal Republican support, that it was time to hold a final ballot at 12:00 p.m. EST Tuesday.

If the measure passes as expected, the Senate and House of Representatives will enter final negotiations on a compromise bill, with Obama arbitrating disputes. The cost of the House bill was priced at $819 billion.

Republicans say some spending in the bill would not boost the economy, mired in its worst recession in 70 years. But Democrats, who control Congress and the White House, were forging ahead, arguing that a mix of tax cuts and spending were urgently needed.

Just before the Senate voted, Senate Majority Leader Harry Reid said, "Help is on the way" with a bill that "will put America back to work." But he tempered his remarks by saying, "This legislation is not a silver bullet."

The bill advanced in the Senate as Obama began a week of traveling around the country trying to build public support for the measure and he called for restoring some education funding that was being dropped.

"Endless delay or paralysis in Washington in the face of this crisis will bring only deepening disaster," Obama said in Elkhart, Indiana, where the White House said the unemployment rate had hit a debilitating 15.3 percent.

Obama wants the stimulus legislation on his desk for signing into law by this weekend in the hope that it will begin to create and save up to 4 million jobs.

Markets closely watching

US stock markets, which closed largely unchanged, are closely watching the economic stimulus bill as well as the Obama administration's proposed unveiling on Tuesday of a new bank rescue plan aimed at fixing a crippling credit crunch.

There are big political risks for both parties in the struggle over the stimulus, which at about $838 billion would be almost 6 percent of gross domestic product and about a quarter of the size of the US federal budget.

Congressional elections are less than two years away and without some improvement in the economy, Democrats in control of the White House and Congress could be punished by voters in 2010.

Republicans have argued that the best way to boost the economy is mainly through tax cuts instead of jacked up government spending. But with a new Gallup survey finding that 67 percent of the public approves of the way Obama has sought stimulate the economy, their opposition carried its own risks.

Even as the Gallup poll found that the approval rating for Republicans in Congress was 31 percent, less than half of Obama's rating, Senate Minority Leader Mitch McConnell said: "I think that this is a poorly crafted bill."

"I think you could get the job done for about half of that, which would still be a very robust stimulus package by any historical standard," McConnell said. The House bill passed with no Republican votes.

Cost estimate rises

The Senate compromise was estimated to cost about $827 billion but the Congressional Budget Office revised that projection to $838 billion.

The Senate measure includes $139 billion in individual income tax breaks, $43 billion for more unemployment benefits and almost $47 billion to encourage Americans to buy new cars and homes. It also includes tens of billions of dollars to rebuild roads and help states plug growing budget gaps.

"Many have said it spends too much, others have said it cuts too much spending, that's a sign to me that perhaps we've got it just about right," said Senator Ben Nelson, a Nebraska Democrat who helped craft the compromise. "The time for talk is over and it is time to act."

The spending cut from the original Senate bill has drawn some criticism from Obama because it deleted $16 billion to rebuild schools.

"I'll be honest with you, the Senate version cut a lot of these education dollars. I would like to see some of them restored," Obama said in Indiana

The Senate compromise also cut $40 billion from the $79 billion to help states and $5.8 billion for preventative health initiatives. House-Senate differences over spending and tax provisions will have to be worked out in coming days.

But Republican senators Arlen Specter and Susan Collins, who broke with their leadership to support moving ahead with the stimulus package, warned against adding a lot more spending or risk losing their votes.

"If it's more expensive, if it has wasteful spending added back in, then it would be very difficult for us to support," Collins said.