Details of a Trimmer Stimulus Emerge

The new stimulus package seemed to defy Washington’s peculiar laws of physics, where numbers that go up don’t often come back down.

But by producing a compromise with a sticker price of about $789 billion — less than the amount approved in either the House or the Senate — Congress appears to have ensured quick passage. Indeed, the Senate may begin debate on the package Thursday and may even pass it before the House, which would endorse it by the end of the week.

The stimulus bill initially passed by the House had a projected cost of $820 billion, on the high end of the White House’s recommended range. The Senate then went even higher, to $838 billion. And yet Congressional leaders and the Obama administration have settled on a final deal that lopped nearly 4 percent off the House bill and nearly 6 percent from the Senate version.

Not that the compromise satisfied all Congressional leaders. “This bill was meant to be a stimulus that was timely, targeted and temporary,” Senator Mitch McConnell of Kentucky, the Republican minority leader, said Thursday on the Senate floor. “Unfortunately, it appears to be none of the above.”

Since winning the White House and control of Congress, Mr. McConnell went on, “Democrats have been making up for lost time with a government spending spree on the taxpayer credit card.”

The reductions in the two versions came after more than 24 hours of direct, rapid-fire negotiations between Congress and the administration, and after weeks of debate over the particulars in the legislation that helped officials quickly find the areas where they could pare back. All sides had to give, and some programs dropped like stones.

That included even President Obama’s signature middle-class tax cut proposal, which he initiallypromised would give individuals up to $500 and families up to $1,000. In the end, those numbers fell to $400 for individuals and $800 for couples, lopping about $30 billion from the cost of the original plan.

Social security and disability recipients will get a one time payment of $250, down from an original proposal of $300.

One of the single biggest reductions was a cut of $25 billion from a state fiscal stabilization fund that will largely be used for education. The House had proposed $79 billion; the Senate reduced it to $39 billion. The final agreement fell in between, with an added adjustment demanded by House Democrats that will allow states to use some of that money for the renovation and repair of school buildings.

That agreement came only after senators who were crucial to the deal insisted on removing a separate line-item that would have provided $16 billion for school construction.

And while the cuts were designed to meet the demands of centrist senators, including three crucial Republicans who insisted on a smaller bill, it was far from clear if the reductions would ultimately be seen as either good politics or good economics.

Some economists have warned that the package may be too small, given the grave condition of the economy. And, as Mr. McConnell’s remarks underscored, the cut of nearly $50 billion from the Senate proposal was not enough to quiet conservative critics who have said the package is still bloated and will only burden future generations of taxpayers.

Other cuts could be found throughout the huge package of tax breaks and new government spending. The Senate had proposed a $15,000 tax incentive for all home buyers, a generous morsel that had real estate brokers smiling. But the final deal falls back to a House proposal that would provide much less money and would limit the provision to first-time home buyers within certain income limits.

Although details were still being worked out, officials said that eligible first-time homebuyers would be able to claim a credit of $8,000.

The House and Senate negotiators also agreed to scale back spending intended to help provide health insurance to the unemployed. The House originally proposed that the government subsidize 65 percent of private insurance, under a law known as Cobra, for one year after the loss of a job. The final deal calls for a 60 percent subsidy, and for only nine months. The House had also wanted to let states offer temporary Medicaid coverage to jobless individuals who did not qualify for Cobra coverage. That proposal was eliminated entirely.

The bill did, however, retain an extension of unemployment benefits, and a Senate provision exempted the first $2,400 of jobless benefits from federal taxes. It also retained a $70 billion provision to protect millions of middle income taxpayers from having to pay the alternative minimum tax in 2009.

As the House and Senate prepared for final votes on the measure, hoping to get the bill on President Obama’s desk for his signature by Monday, a broad array of industries and interest groups were trying to calculate the winners and losers within the 700-odd pages of legislation.

The deal reflected a calculated gamble by Mr. Obama in the first weeks of his term. To win Republican votes, the final stimulus package is considerably leaner than what many economists say is now needed to jolt the economy, given its grave condition.

But it is unclear if Mr. Obama will be able to claim credit for bringing change to Washington by trying to win bipartisan support for his first major piece of legislation. Not a single House Republican voted for the bill when it came to the floor two weeks ago, and despite many compromises in the Senate, only three Republicans came on board.

House Democrats, who are angry over some cuts, particularly for school construction, initially balked at the deal, and delayed a final meeting on Wednesday between House and Senate negotiators.

Democratic officials said that Speaker Nancy Pelosi felt that Mr. Reid went too far by announcing a deal before it had been vetted by her office or discussed by House members in an emergency caucus meeting, setting off the last-minute flare-up.

Ms. Pelosi said at a news conference on Wednesday that the delay helped House Democrats win some final concessions, including the agreement to let states use some money in a fiscal stabilization fund for school renovations. “There is no question that one of our overriding priorities in the House was a very strong commitment to school construction,” she said. “That’s still in the bill.”

But they soon relented, and the meeting got under way in the packed Lyndon B. Johnson Room on the Senate side of the Capitol.

Despite the House Democrats’ show of pique, the stimulus bill is the most prominent display yet that their party now fully controls Washington. Their ability to push the package forward was a major change from the years of losing battles during President George W. Bush’s tenure. For Republicans, it underscored the limits of their party’s diminished ranks.

Even trimmed to $789 billion, the recovery measure will be the most expansive unleashing of the government’s fiscal firepower in the face of a recession since World War II.

And yet it seemed almost trifling, compared with the $2.5 trillion rescue plan for the financial system — a combination of loans to banks and incentives to bring private capital into the banking system — that was announced on Tuesday by Treasury Secretary Timothy F. Geithner.

Although the final legislative language of the stimulus bill was not immediately available, lawmakers said it contained more than $150 billion in public works projects for transportation, energy and technology, and $87 billion to help states meet rising Medicaid costs.

After huddling in Ms. Pelosi’s office 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 stimulus by noon on Wednesday.

Even before the last touches were put to the bill, some angry Democrats said that Mr. Obama and Congressional leaders had been too quick to give up on Democratic priorities. “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, “Why is it in there? It has nothing to do with stimulus. It has nothing to do with recovery.”

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, had put a firm stamp on the stimulus package.

For instance, negotiators opted to keep many of the Senate’s reduced spending provisions, but 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. He was one of the three Republican supporters of the recovery package.

“I think it is an important component of putting America back on its feet,” Mr. Specter said, though he added that it was still a difficult vote “in view of the large deficit and national debt.”

The Senate bill came together only after a bipartisan group of centrist senators, led by Susan Collins, Republican of Maine, and Ben Nelson, Democrat of Nebraska, reached a deal to trim the cost of the package to $838 billion from more than $920 billion.

“These aren’t easy times, obviously for America,” said Senator Olympia J. Snowe, Republican of Maine, who was also a member of that group. “Given the gravity of the circumstances economically, I thought it was important to be part of a process that could yield a consensus-based solution.”

But the majority of Republicans continued to criticize the stimulus measure on Wednesday as a bloated and ill-designed spending bonanza by Democrats on favored projects that would not help lift the economy out of recession but would permanently expand the federal government and plunge future generations of Americans deep into debt.

Indeed, the formal House-Senate conference meeting, usually an elaborate parliamentary ritual with reams of legislative paperwork strewn across cluttered conference tables, instead served mostly as a live, televised forum for some of the most powerful Democrats and Republicans in Congress to trade barbs.

Senator Charles E. Grassley, Republican of Iowa, complained that despite Mr. Obama’s call for bipartisan cooperation, Republicans had largely been shut out. “We didn’t have a chance to negotiate,” Mr. Grassley said.

By DAVID M. HERSZENHORN and CARL HULSE

http://www.nytimes.com