Obama's economic recovery plan on track in Senate

[February 07, 2009]  WASHINGTON (AP) -- President Barack Obama's economic recovery plan is on track to pass the Senate after a handful of moderate Republicans and Democrats forced more than $100 billion in cuts in programs that wouldn't create many jobs right away.

But the group backed away from a confrontation that threatened to kill the legislation altogether after White House Chief of Staff Rahm Emanuel weighed in to urge Democrats make a final round of concessions.

Architects of the compromise included Susan Collins, R-Maine, and Ben Nelson, D-Neb., who represented a broader group of moderates unhappy that so much money went into programs they thought wouldn't create jobs. Eventually, every Republican except Collins and Arlen Specter, R-Pa., left the talks, which finally produced a deal with the White House late Friday afternoon.

While ensuring passage of Obama's plan in the Senate within a few days, the deal sets up difficult negotiations with the House.

Officials put the cost of the bill at $827 billion, including Obama's signature tax cut of up to $1,000 for working couples. Also included is a tax credit of up to $15,000 for homebuyers and smaller breaks for people buying new cars. Much of the new spending would be for victims of the recession, in the form of unemployment compensation, health care and food stamps.

In a key reduction from the bill that reached the Senate floor earlier in the week, $40 billion would be cut from a "fiscal stabilization fund" for state governments, though $14 billion to boost the maximum for college Pell Grants by $400 to $5,250 would be preserved, as would aid to local school districts for the No Child Left Behind law and special education.

A plan to help the unemployed purchase health insurance would be reduced to a 50 percent subsidy instead of two-thirds.

Senate Majority Leader Harry Reid, D-Nev., who had sought Friday to cut just $63 billion in spending from the bill, throwing a monkey wrench into the talks, called it an imperfect compromise. He warmly praised it nonetheless.

"But at the end of the day, we are passing a bold and responsible plan that will help our economy get back on its feet, put people to work and put more money in their pockets," Reid said.

Despite a 58-41 majority bolstered by the elections, Democrats need 60 votes to clear a key procedural hurdle on Monday and advance the bill to a final vote.

In addition to Collins and Specter, Republican Sen. Olympia Snowe of Maine pledged to vote for the legislation.

The end-stage negotiations played out against a backdrop of yet another dismal jobs report - 598,000 jobs lost in January and the national unemployment rate rising to 7.6 percent.

At its core, the legislation is designed to ease the worst economic recession in generations, and combines hundreds of billions of dollars in spending to boost consumption by the public sector, along with tax cuts designed to increase consumer spending.

States would get large sums aimed at forestalling cuts in services or tax increases.

Much of the money would go for victims of the recession in the form of food stamps, unemployment compensation and health care. There is money, as well, for construction of highways and bridges.

It's hoped that the combined effort would work its way into the economy and save or create 3 million jobs or so to begin to ease the nation out of the recession by the end of this year.

[Associated Press; By ANDREW TAYLOR]

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