At a White House signing ceremony, Obama and Democrats savored a long-sought victory with passage of legislation to expand health care benefits for millions of working class children. But the more than $900 billion stimulus bill in the Senate was the president's chief focus, as Republicans, including McCain, began rolling out alternatives tilted more to tax cuts and housing.
"The stark reality is we need to finish this bill," said Senate Majority Leader Harry Reid (D-Nev.) on the floor Wednesday night. Behind-the-scenes there was growing pressure to cobble together a package of spending reductions that would clear the way for passage late Thursday or Friday.
"I talked to him this morning," McCain said of his phone call from Obama. "We'd like to negotiate, we'd like to sit down and try to work something out that would be truly job creating."
It was Obama who reached out to the Arizona Republican, who has been aggressively attacking the president's initiative. Their discussion covered other topics as well, McCain said, but dovetails with other efforts by Obama, including a set of remarkable face-to-face meetings Thursday with swing senators-alone without any aides present.
In McCain's case, his own $421 billion recovery package devotes about 70 percent of its resources to tax cuts - a much greater share than either the House or Senate stimulus bills offered by Democrats.
But included in this number is a $165 billion less-targeted version of Obama's own payroll tax break, as well as a $20 billion homeowner tax credit already adopted by the Senate on Tuesday. And more than many conservatives, McCain is willing to commit new benefits to help the unemployed and families facing foreclosure on their homes.
With 58 votes in their caucus, Senate Democrats have a solid majority for the more than $900 billion package, but they need Republican help to get the 60 needed to waive budget points of order. Even as he called McCain, Obama met with three senators whose votes he wants: Maine Republican Sens. Olympia Snowe and Susan Collins and Nebraska Sen. Ben Nelson, a Democrat unhappy with the total cost of the package.
Collins told Politico that she and Nelson are getting close to a package of cuts, and Nelson said later that at least $50 billion in spending reductions will be needed. This is not out of reach politically according to some estimates by other Democrats and administration officials, and the real question is timing and what venue.
It will be easier to work a deal once the bill is off the Senate floor and into final negotiations with the House, but moderates like Collins and Snowe would like to see at least some down payment up front.
Senate Budget Committee Chairman Kent Conrad (D-N.D.) has been working with Sen. Lindsey Graham (R-S.C.), a close McCain ally, on an estimated $36 billion package that would make reductions to help pay for new housing initiatives. If this takes shape, or Nelson and Collins reach agreement, it could become an important test of where the political center lies.
"It was amazing," Collins told Politico of her 30 minute meeting with Obama. "President's don't do that. But it does help to be alone and have a free exchange."
"He's willing to recommend some cuts or at least not oppose cuts," she said of the president. " He told me that he wants to work with Ben Nelson and me and that his economic advisers would be in touch."
Speaking to reporters earlier outside the White House, she also stressed the urgency from Obama's standpoint. "
"The president made very clear that he wants the bill, that he wants it this week and that it needs to be of sufficient sizeto do the job."
This same impatience could be felt among Democrats on the Senate floor. "Where I live in Missouri, the notion of doing nothing is not an option," said Sen. Claire McCaskill (D-Mo.). "At the end of the day, this notion that we are going to put this on a shelf, are you kidding me? If we don't do something, we're going to have some explaining to do."
Together with McCain's alternative, the Republican leadership is trying to turn the stimulus debate back more toward housing - the root cause, many argue, for the economic downturn. Passage Wednesday night of the expanded $15,000 tax credit to boost home sales was a first step, and waiting in the wings is a much more ambitious proposal designed to make new and refinanced mortgages available at rates of 4 percent to 4.5 percent.
The government's commitment would be capped at $300 billion, but the chief proponent, Sen. John Ensign (R-Nev.) predicted as many as 40 million homeowners could benefit, and the lower rates will counter forecasts that housing values will drop another 12 percent this year, he said.
"It's not just homeownership. People are losing their jobs," countered Sen. Ben Cardin (D-Md.). And after months of fighting with the Bush administration over the housing crisis, some Democrats are incredulous at the new Republican focus on the problem.
Ensign hopes, for example, to make the lower rates available to homeowners with mortgages as high as $730,000, and the Republican description of the bill describes the beneficiaries as all "credit-worthy."
"We were subject to two years of inaction by the previous administration; that's why bankruptcy is now an issue," said House Education and Labor Committee Chairman George Miller (D-Calif.), a close ally of Speaker Nancy Pelosi. "And this is just for 'credit-worthy' people?"
"It's a Republican plan. It helps everybody who doesn't need help."