House-passed economic stimulus likely to undergo significant change in Senate

By Curt Anderson

Associated Press

WASHINGTON – The $100 billion economic stimulus package passed by the House is likely to undergo significant change in the Democratic-led Senate, where far greater support exists for additional spending and far less for cuts in business taxes.

More aid for the unemployed, including federal help with laid-off workers’ health insurance premiums, and up to $20 billion in spending on homeland security and infrastructure items are among proposals gaining ground in the Senate.

The House bill, passed Wednesday by a wafer-thin 216-214 margin, comprises almost entirely tax cuts. President Bush says he is willing to negotiate with Democrats but does not want a stimulus plan composed mostly of new spending.

And he wants the package quickly.

“We need a stimulus, and we need it now,” Treasury Secretary Paul O’Neill said.

Nevertheless, the Senate is extremely unlikely to take up its version before next week at the earliest. The majority leader, Sen. Tom Daschle, D-S.D., has said he expects to have a bill to the president by Thanksgiving.

Daschle told reporters Thursday that no decisions have been made on when or how to proceed but that efforts will continue behind the scenes as the Senate works on regular government spending bills next week. Daschle said the stimulus plan is not “as front-burner an issue” as the appropriations bills.

Bush praised four main elements in the House bill, which costs $99.5 billion in 2002 and $159 billion over 10 years. They include a new round of tax rebates for people who didn’t get a check earlier this year; repeal of the corporate alternative minimum tax; enhanced expensing write-offs for business capital assets; and acceleration of the cut in the 27 percent individual income tax rate so it falls to 25 percent in 2002, four years earlier than under current law.

The trick to coming up with an acceptable formula will be to find middle ground, said Sen. John Breaux, a Louisiana Democrat who co-chairs a pivotal band of Senate moderates. Breaux said Republicans will oppose broad new entitlement spending, and Democrats don’t favor the House tilt toward corporate tax cuts.

“Unless we have a bipartisan package, we won’t be able to get a bill out of the Senate,” Breaux said.

The close House vote, largely along party lines, came after hours of noisy debate reflecting the deep political divide on economic policy. It was a departure from the congressional unity on other matters since the Sept. 11 terror attacks. Seven Republicans voted against the bill; three Democrats voted for it.

“It officially shatters the myth of bipartisanship,” said Rep. Charles Rangel, D-N.Y.

Undeterred, Republicans said the legislation was the ideal way to encourage renewed business investment, stop job layoffs and boost consumer confidence in time for the holiday shopping season.

“Investment is the driving engine in the economy,” said House Majority Leader Dick Armey, R-Texas. “This bill provides a reward for the risk-takers who create jobs in America.”

Democrats sharply disagreed, accusing Republicans of assembling a package that favors the wealthy and big corporations over laid-off workers and threatens to trigger deep future budget deficits. Senate Democrats are certain to make major changes, most likely to give greater aid to the unemployed and fewer business tax cuts.

“The workers who have lost their jobs get bread crumbs from this bill,” said House Minority Leader Dick Gephardt, D-Mo.

In addition to the four elements praised by Bush, key items in the House bill would effectively cut long-term capital gains tax rates from 20 percent to 18 percent for most taxpayers, give major corporations refunds of alternative minimum taxes they paid up to 15 years ago and allow companies to deduct current operating losses from taxes they paid up to five years earlier.

Even though there remains considerable bipartisan support for some of the tax items, Democrats said the measure’s $12 billion in grants to states was far too little to tackle the growing unemployment problem.

They proposed an alternative that would have added 26 weeks of unemployment benefits and provided a 75 percent federal match for COBRA health insurance available to laid-off workers, but it was defeated on a 261-166 vote.

Senate Democrats have made similar proposals, and the Appropriations Committee chairman, Sen. Robert C. Byrd, D-W.Va., outlined a $20 billion package of homeland security spending that includes accelerated purchase of vaccines, transportation security measures, nuclear plant safety and safe drinking water.

Byrd said these measures would address Americans’ “fears about future terrorist attacks” and encourage them to resume normal lives.

Bush demurred. Appearing at a Maryland printing plant Wednesday, he echoed House Republicans in repeating that the $60 billion in spending already approved by Congress for recovery and war efforts was enough. “I strongly believe it’s time to balance this amount of spending with additional tax relief,” the president said.