WASHINGTON — Congressional Democrats on today abandoned plans to offer a wide-ranging economic stimulus plan next week, putting off any chance that the federal government would provide a major jolt to the economy until after President-elect Barack Obama is sworn in Jan. 20.
Instead, Democrats have scaled back their proposal to a package that will include a $6 billion expansion of unemployment benefits and a $25 billion cash infusion for the struggling auto industry, setting up a confrontation with Senate Republicans over whether the government should expand its rescue program beyond the financial sector.
Senate Majority Leader Harry Reid, D-Nev., plans to offer that package Monday, the first day of what is slated to be a week-long lame duck session of Congress. A key vote could come Wednesday and if that fails, Democrats may have to settle for the 13-week extension of unemployment benefits as the only economic measure approved before they close until January.
In a letter to GOP leaders, Reid blamed Republicans and the White House for opposition to the larger plan, which was to include the unemployment benefits, auto industry help, aid to states and a large increase in infrastructure spending. The total package would have cost $61 billion to $150 billion.
“I understand that you currently oppose such a package and that Senate Republicans are prepared and able to block such legislation. This is disappointing and I hope you will reconsider,” Reid wrote to Senate Minority Leader Mitch McConnell, R-Ky.
McConnell, accusing Reid of publicly airing a private conversation, noted that Democrats still have not indicated how they intend to offer help to the auto industry. “So it would be a real challenge to promise any level of support or opposition sight unseen,” McConnell said. “And while Sen. Reid’s public comments referenced our private conversation on the level of support for his yet unwritten bill, we don’t yet know if there is even sufficient support from within his own ranks.”
Democrats said they expect to craft a larger stimulus package in January and, aides said, hope to pass it in the earliest days of the Obama administration, when they will have much larger majorities at both ends of the Capitol.
As of this evening, Reid was considering methods of offering the money to the auto industry. In the House, Rep. Barney Frank, D-Mass., chairman of the Financial Services Committee, is drafting legislation that would carve out $25 billion from the $700 billion financial rescue plan Congress already has approved. The money would come in the form of “bridge loans” for day-to-day operations, which could help General Motors with the cash crisis that is driving it toward bankruptcy.
But the White House so far has balked at including the auto industry in the rescue program, officially known as the Troubled Asset Relief Program. Late Friday, White House officials instead endorsed reworking a separate federal loan guarantee program for the auto industry, which was signed into law in September and intended to help automakers retool their plants to build more fuel-efficient cars.
If Congress loosened the requirement that the industry convert to fuel-efficient cars, automakers could more quickly access money for other day-to-day operations, the White House said.
“We are now actively calling on Congress to pass legislation next week that will amend the loan program and accelerate much needed funds to the auto companies,” White House press secretary Dana Perino said.
Democrats strongly oppose that proposal, arguing that part of the long-term inefficiency of the auto industry was its reliance on gas-guzzlers that no longer sell.
“The president’s proposal would unwisely divert money urgently needed for modernization of the U.S. auto industry, so that it can be competitive in the future, making energy-efficient vehicles and meeting our national security imperative of energy independence,” House Speaker Nancy Pelosi said.
Pelosi, D-Calif., told her colleagues to assemble Wednesday for consideration of the smaller stimulus package, but even that session is contingent upon the Senate approving legislation for the auto industry.
Any bailout of the Detroit automakers would include provisions to limit executive compensation and provide the Treasury with equity stakes to ensure the government would be repaid in full if the participating companies thrive financially in the years ahead.
If there is no bipartisan agreement by Monday, Reid is expected to set up a key test vote for Wednesday. He would need 60 votes to head off a GOP filibuster. With Obama resigning on Sunday, Reid likely would need all 50 members of the Democratic caucus and at least 10 Republicans to pass the legislation.
Capitol Hill aides hope that, should that legislation fail, a stand-alone version of the unemployment benefits could pass. The House already has approved that measure and there is little opposition to it among Senate Republicans.
A growing number of Republicans — upset that the TARP program has resulted in the largest intrusion of the federal government into the private marketplace since the Great Depression — are opposed to an auto bailout or the inclusion of other industries in the rescue plan originally designed for the financial services sector.
“When is enough enough?” said Sen. John Cornyn, Texas, who is slated to take over the GOP’s campaign committee next year. “With the very first vote after the election, Democratic leaders in Congress want to pass a $25 billion handout to Detroit with no promises of reform, accountability or transparency by the automakers and their union base.”
“You’ve got to let them fail,” Gov. Mark Sanford, R-S.C., incoming chairman of the Republican Governors Association, said at the group’s annual meeting in Florida. “They made some bad bets, and there ought to be a marketplace consequence.”
The proposal to include the Detroit automakers in the $700 billion bailout has split the industry, with foreign carmakers on the sidelines while U.S. companies work with manufacturing and labor allies to support the measure. A growing number of Japanese, German and Korean autos are built and sold in Southern states from Texas to South Carolina, nicknamed “Detroit South” by industry insiders.
The U.S. Chamber of Commerce, meanwhile, has urged lawmakers to support the bridge loan program, saying that the number of car loans has fallen by 50 percent this year and threatens a sector that accounts for 5 million direct and indirect jobs.
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