Centrist compromise clears stimulus for Senate passage

WASHINGTON — Senate Democrats and a handful of moderate Republicans agreed Friday to push a revamped economic recovery plan costing at least $780 billion, after a strong push from a White House ratcheted up pressure on the gridlocked lawmakers.

The new plan, which the Senate could vote on as soon as Saturday, is expected to pass. It slashed an estimated $110 billion from the Democratic-authored bill that's been debated all week.

But it was clear that Democratic measure lacked the 60 votes needed under Senate rules to clear procedural hurdles. Democrats control 58 seats in the 100-member body.

Led by Sen. Ben Nelson, D-Neb., the centrists joined with two like-minded Republicans — Sens. Susan Collins of Maine and Arlen Specter of Pennsylvania — and produced a package that, according to senators, cuts $19.5 billion slated for school and higher education construction and half of a $79 billion fund to help states with education spending.

Also trimmed were dozens of other programs, including Superfund, Head Start and Early Start, energy loan guarantees and historic preservation.

The plan would retain some key features from the Senate Democrats' bill. It would spend $45.5 billion on infrastructure, including highway projects; help fund water and sewer projects; provide $87 billion to states for help with Medicaid; and give a $70 billion break from the Alternative Minimum Tax, according to Sen. Collins, R-Maine.

The compromise "cuts away many projects that are worthwhile projects but do not belong in a stimulus package," she said, "because they have nothing to do with turning our economy around and creating and saving jobs."

Democrats who backed the original bill explained that while they disliked the changes, they had little choice.

"I come from a state that has to build a school a week to stay even. But I also come from a state with more people unemployed than some states have population," said Sen. Dianne Feinstein, D-Calif.

The logjam broke as Obama got more involved.

Obama Friday had turned up the pressure on lawmakers with some tough talk and a new plan to make personal pitches for support. He acted as the government reported that the nation's unemployment rate ballooned to 7.6 percent in January, and monthly job losses were the worst in 35 years.

"These numbers demand action," the president said. "It is inexcusable and irresponsible to get bogged down in distraction and delay while millions of Americans are being put out of work. It is time for Congress to act."

The compromise congealed when Democrats agreed to education cuts.

Sen. Ton Harkin, D-Iowa, was clearly annoyed at the concessions, but said he would support the bill.

"It's something that needs to get done," he said, adding, "and we Democrats need to remind people why these school cuts were made. We can't let up."

Still, most Republicans objected to the compromise.

"Republicans are ready to support a stimulus bill. But we will not support an aimless spending spree that masquerades as a stimulus," said Senate Republican Leader Mitch McConnell, R-Ky.

"If this legislation was passed," added Sen. John McCain, R-Ariz., "it'd be a very bad day for America."

"Probably the largest generational theft bill in the history of mankind," said Sen. Tom Coburn, R-Okla., emphasizing that the measure will add to the national debt.

The agreement, reached after three days of closed-door negotiations, was President Obama's first major legislative test, and the White House made a hard last-minute push to get it.

White House Chief of Staff Rahm Emanuel ironed out final details at a closed-door meeting with Collins, Specter, Nelson, Democratic Leader Harry Reid of Nevada and Independent Joseph Lieberman of Connecticut.

Emanuel then pushed the plan at what was described as a friendly 20-minute closed-door meeting of Democratic senators.

Once the Senate passes the bill, members from both houses of Congress are expected to meet and craft a compromise that they hope would be ready for final votes by the end of next week.

Obama will step up his effort to push the process along. He's calling for millions of his campaign supporters this weekend to gather for house parties to drum up support — although sign-ups were quite low Friday — and Monday evening will hold his first presidential news conference.

The president also will begin holding town hall meetings in high-unemployment cities — a

change from his earlier plans to stay in Washington. Monday he'll travel to Elkhart, Ind., where White House press secretary Robert Gibbs said unemployment had surged in the past year from 4.7 percent to 15.3 percent.

On Tuesday, Obama plans to travel to Fort Myers, Fla., where unemployment is 10 percent.

"I think going directly to where the problems seem even more acute (is) important to the

president and important in his effort to convince Congress to move swiftly," Gibbs said.

Obama will be trying to pressure a Democratic-led Congress that, despite all the rancor,

has largely agreed on major parts of the package.

The Senate and the House of Representatives separate versions of the legislation are close on infrastructure spending numbers. Both also have about $5 billion to help fund public housing. Both provide a $79 state stabilization fund for education programs, as well as about $13.5 billion to fund programs for children with disabilities. And both contain Obama's "Making Work Pay" tax break for working families, which gives most taxpayers an effective rebate of $500.

There also are some significant House-Senate differences, notably on housing. Senate Democrats embraced a GOP-authored plan to give a $15,000 tax credit to people who buy new homes, recently foreclosed homes or houses facing foreclosure. The House bill omits this.

Sen. Johnny Isakson, R-Ga., the chief sponsor, patterned his amendment after a tax credit that then-President Gerald Ford pushed through for anyone who bought a home in 1975 to help alleviate a housing crisis then.

"We have a pervasive housing problem," Isakson said, "and we have a historical precedent that works."

But would it? Several housing experts agree that every little bit could help stem foreclosures — there were 3.2 million foreclosure filings in 2008, an 81 percent increase over 2007 — and boost sluggish new housing sales.

Analysts doubt, though, that the $15,000 tax credit is enough to have a major impact on the underlying problems that are crippling the housing market.

"The bigger problem is the availability of credit," said Rick Sharga, vice president of marketing for RealtyTrac, a real estate Web site. "It will do nothing for people in foreclosure. We have a major problem with unemployment numbers and the tightness of available credit in the market."

Stephanie Moulton, an assistant professor at the Ohio State University's John Glenn School for Public Affairs, said the tax credit could "stimulate the economy generally" but wondered, given the rising unemployment rate and difficulty in obtaining credit, who'd be able to take advantage of the offer.

Looking at the people facing foreclosure, the problem is the high loan-to-value they are facing," she said. "They can't get the value out of their homes — they need to get the full value out of their homes, and I don't know if a $15,000 credit will help."

(Margaret Talev contributed to this report.)


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