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Deal Struck on $789 Billion Stimulus

Posted by tothewire on February 11, 2009

Senators Susan Collins, Harry Reid, Arlen Specter, Olympia J. Snowe and Joseph I. Lieberman left a meeting on Wednesday after an agreement was reached on the economic stimulus bill.

Senators Susan Collins, Harry Reid, Arlen Specter, Olympia J. Snowe and Joseph I. Lieberman left a meeting on Wednesday after an agreement was reached on the economic stimulus bill.

WASHINGTON — Congressional negotiators announced Wednesday afternoon that they had reached agreement on a $789 billion economic stimulus bill, clearing the way for final action and President Obama’s signature.

“The differences between the House and Senate versions, we’ve resolved,” Senator Harry Reid of Nevada, the Democratic majority leader, said in a Capitol news conference. The differences were resolved by a lot of intense “give and take,” Mr. Reid said, “and if you don’t mind my saying so, that’s an understatement.”

Negotiations had been going on all day, following extensive talks on Tuesday night, to close the gap between the Senate and House versions. In the end, the agreed-upon package will pare back Democrats’ proposed spending on education and health programs in favor of tax cuts that were needed to win Republican votes in the Senate.

Senator Susan Collins of Maine, a centrist Republican whose support was crucial to the outcome, said the final package includes $150 billion in spending on infrastructure, including transportation facilities, and considerable tax relief. Moreover, she said, it includes significant money to aid state governments.

Despite intense lobbying by governors, the final deal slashed $35 billion from a proposed state fiscal stabilization fund, eliminated $16 billion in aid for school construction and sharply curtailed health care subsidies for the unemployed.

In driving down the total cost of the stimulus bill — from $838 billion approved by the Senate and $820 by the House — legislators also sharply reduced proposed tax incentives for buyers of homes and cars that held huge public appeal. Senator Collins said getting the final number to under $800 billion was more than symbolic; it meant “a fiscally responsible number,” she said.

But the final bill retained a $70 billion tax cut that would spare millions of middle-class Americans from paying the alternative minimum tax in 2009, which some Democrats decried as wasting a large chunk of the bill on something that would do little to lift the economy and that Congress would have approved regardless of the recession.

In announcing the agreement, Mr. Reid credited the efforts of House Speaker Nancy Pelosi, who he had been indispensable in resolving differences between the two chambers of Congress.

After huddling in the office of Ms. Pelosi on Tuesday until nearly midnight, top White House officials and Congressional leaders had all but ironed out the differences between the House and Senate versions of the recovery package by noon on Wednesday.

“I think we are way down the road from where we started and I don’t think there is that much more of a distance to travel until we are able to have it put together,” said Senator Ben Nelson, Democrat of Nebraska who is a leader of a bipartisan group of senators whose support is so crucial that they effectively hold veto power over the final legislation.

Even trimmed to $789 billion, the recovery measure will be the most expansive unleashing of the government’s fiscal firepower to fight a recession in modern history. And yet it seemed almost trifling compared with the potential price tag of $2.5 trillion for the rescue plan for the financial system announced on Tuesday by Treasury Secretary Timothy F. Geithner.

Even before the last touches were put to the bill, the emerging deal infuriated some Democrats who said that President Obama and Congressional leaders had been too quick to give up on Democratic priorities. Some critics also suggested that the final figure was too small to be effective because of the grave condition of the American economy.

“I am not happy with it,” said Senator Tom Harkin, Democrat of Iowa. “You are not looking at a happy camper. I mean, they took a lot of stuff out of education. They took it out of health, school construction and they put it more into tax issues.”

Mr. Harkin said he was particularly frustrated by the money being spent on fixing the alternative minimum tax. “It’s about 9 percent of the whole bill,” he said, “which we were going to do later this year in a tax bill. Why is it in there? It has nothing to do with stimulus. It has nothing to do with recovery. This makes no sense whatsoever.”

But even as Congressional leaders and top White House officials went through the package with a carving knife, it was clear that the three Republicans who agreed to support the bill in the Senate wielded extraordinary power, and along with conservative Democrats in their coalition, had put a firm stamp on the stimulus package.

For instance, even as negotiators accepted many of the Senate’s reduced spending provisions, they were careful to maintain an additional $6.5 billion for medical research that was inserted at the insistence of Senator Arlen Specter, Republican of Pennsylvania, who is a cancer survivor.

Republican opponents of the stimulus measure continued to criticize it on Wednesday as a bloated and ill-designed spending bonanza by Democrats that would not help lift the economy out of recession but would plunge future generations of Americans deeper into debt.

“Yesterday the Senate cast one of the most expensive votes in history,” the Republican leader, Senator Mitch McConnell of Kentucky, said. “Americans are wondering how we’re going to pay for all this. Judging by the market reaction to Secretary Geithner’s announcement yesterday and the newspaper editorials this morning, it’s clear that everyone is looking for a little more detail.”

In hammering out a final agreement, the negotiators not only had to settle on overall dollar amounts for the various provisions but in some cases had to resolve bitter disagreements over the formulas that would be used to divide some of the largest categories of money to be directed to state and local governments.

The stimulus plan includes $87 billion in federal aid to states for rising Medicaid costs, and powerful blocs of lawmakers, largely divided between urban and rural states, had been fighting over whether to divvy up the funds according to the traditional Medicaid reimbursement formulas or to give extra help to states with high unemployment.


Jeff Zeleny and Kate Phillips contributed reporting.


One Response to “Deal Struck on $789 Billion Stimulus”

  1. Jeff said

    I don’t know how much passing this will help. Economies go through cycles. I read this interesting article on


    on previous recessions. We just need to adjust I guess.


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