Senate Passes $787 Billion Stimulus Bill

A sharply divided Congress approved President Barack Obama's $787.2 billion recovery plan late Friday night, a huge political gamble for Democrats but also a vital beachhead for the new administration as it tries to turn around the collapsing economy.

House passage came on a 246-183 vote—with no support from Republicans. Senate action followed on a 60-38 roll call that stretched for five hours in a near-empty chamber as Sen. Sherrod Brown flew back on a government plane from his mother's wake in Ohio.

Three Republican moderates—Sens. Olympia Snowe and Susan Collins of Maine and Sen. Arlen Specter of Pennsylvania—voted for the bill. But with Sen. Edward Kennedy (D., Mass) ill with cancer, Brown became the needed 60th vote, forcing him to shuttle back and forth between Washington and Ohio where his mother’s funeral is Saturday.

Less than a month after Obama’s Inauguration, the combination of circumstances—together with the sheer immensity of the bill itself—was extraordinary.

Most striking was the stonewall of Republican opposition in the House, even after huge job losses in January and the many changes made in the package since it was first debated weeks ago.

New tax breaks have since been added in negotiations with the Senate. The proposed spending levels are substantially reduced and the overall cost of the package scaled back by more than $30 billion.

Republican aides had predicted this week that 10 to 20 party moderates could join in supporting the bill. But the grassroots pressure from conservatives has been immense, raising fears of Republican primary challenges. The result appears to be a hardening of positions—dramatized Thursday by New Hampshire Republican Sen. Judd Gregg’s withdrawal as Obama’s nominee as Commerce secretary.

The mood in the Senate was more tempered, given the three Republican defections and the huge influence they had on reshaping the Democratic package. But in a bit of political theater, Obama’s defeated rival, Sen. John McCain (R., Ariz.) was given the task of raising the crucial budget point of order against emergency spending in the bill. Gregg, just a day after withdrawing his name for the Cabinet, supported McCain. And even as McCain congratulated Obama on his anticipated victory, he was scathing in his comments.

“That this is bipartisan legislation is simply not accurate,” he said. “We want to work with the other side, and this is not the example that I think the American people wanted.”

At their moment of triumph, Democrats were dismayed not just by the level of opposition from Republicans but the failure of anyone to step forward and ease the situation by offering themselves as a proxy vote for Kennedy, suffering from a brain tumor.

The Massachusetts Democrat had repeatedly put his health at risk by returning for the earlier rounds to ensure 61 votes for Obama—and give some political protection to the three Republican moderates. The fact that he would not be there Friday raised anxiety, even to the point that his wife, Victoria, called the three Republicans to ensure their support if her husband did not return.

By the same token, the fact that the task was so difficult orced Democrat—and the new administration—to forge a closer alliance in their first real test of power.

Senate Majority Leader Harry Reid (D., Nev.) took the lead in reaching a compromise with the moderate Republicans and then brokering a final bill that could bring along liberal House Democrats without fracturing his fragile 60-vote coalition. In the long wait for Brown’s flight, the majority leader even took the chair in the Senate for a while Friday night—an unusual sight.

In an interview with Politico, Reid—who keeps portraits of Mark Twain and Harry Truman in his office—described a sometimes eclectic group of people all brought together by the stakes at han.

Sen. Joseph Lieberman, the Connecticut Independent who infuriated Democrats by backing McCain in November, proved a much-needed conduit to Collins and the other moderates. At the same time, Reid took quiet delight in watching deputy budget director Rob Nabors calm his old boss, the fiery House Appropriations Committee Chairman David Obey (D., Wis.)

“Now there is a man,” Reid said. “He is so calm. He would say “Mr. Obey.”

“This bill is a team effort,” Reid said singling out Budget Director Peter Orszag, a bookish political novice, as the real “hero” of the behind-the-scenes brokering. But it was two women, Collins of Maine and Speaker Nancy Pelosi (D., Cal.), who best defined the two Senate-House worlds that had to be bridged.

“Nancy accepts but acknowledges a strong dislike for what I have to do over here,” Reid said with a smile. At the same time, he began every conversation with Collins at a decided disadvantage given the narrowness of the vote.

“I’m playing cards, they give me three aces, Susan pulls out a full house,” Reid said. “No matter what I was dealt, she had a better hand than I had. So it’s hard for the House to accept that. No matter what I did, she had the better deal.”

Working the phones—including a celebrated call to the speaker in the midst of a heated meeting—Obama asserted himself, and gave ground, to get the deal.

But the final bill, filling close to 1,000 pages, is a much needed victory, as the president tries to stem the rise in unemployement but also begin to lay the foundation for long-term savings in energy and health-information technologies. Still ahead are major challenges in dealing with the housing crisis and insolvent banks, but having the stimulus bill in hand allows him more discretion to address those problems.

Final estimates by the Congressional Budget Office, released Friday, brought down the cost slightly from prior assumptions this week to $787.2 billion. But more importantly, CBO projects that 74% of the taxes and spending will be pumped into the economy in 18 months and 91% by October 2011.

An estimated $287 billion would be distributed in the form of tax cuts, targeted heavily toward middle and lower income families in the lowest three income quintiles of income. The administration argues that this approach increases the likelihood that the tax breaks will be spent to stimulate the economy. But the White House is clearly proud to have had a broader progressive impact on the tax system—a theme in Obama’s campaign.

Included is the president’s “Making Work Pay” initiative, a $116 billion tax break to offset payroll taxes for working families worth $400 per individual and $800 for couples. And the bill expands the Earned Income Tax Credit for families with three or more children and also makes it easier for very low income workers to qualify for the refundable child credit.

Another $150 billion is broadly targeted toward infrastructure, running from highway and transit construction to new investments in renewable energy. These include Obama priorities such as $8 billion for high speed rail, $11 billion to improve the nation’s electrical grid, and $7.2 billion to expand access to broadband.

Governors will benefit from $90 billion in added Medicaid funds over the next two years as well as an estimated $53.6 billion fiscal stabilization fund to be shared with local governments.

Unemployment benefits are extended for the long term jobless and increased by about $25 a week. At a cost of $20 billion, food stamp benefits are increased temporarily by 10% and a new $25 billion initiative seeks to help workers, laid off recently, to meet COBRA payments required to maintain health insurance for their families.

“I hope this bill works, I really do,” said House Minority Leader John Boehner, but the Ohio Repulican warned the rushing to act had ignored less costly conservative alternatives. “We owe it to small business and we owe it to ourselves to get this right,” Boehner said. “Bad process leads to bad policy, and that’s what we have here in by view.”

“Bad policy that will drive up the debt and put all of this cost on our kids and grandkids….I hope it works, but I surely have my doubts.”

Democrats countered that Congress, stymied by veto threats in the last year of the Bush administration, had already waited too long to pass a stimulus, and warned that the deepening recession had become the worst economic crisis in the post-World War II era and threatened to slip toward the hardships of the Great Depression in the 1930s.

Speaker Nancy Pelosi (D-Calif.) read excerpts from the famed historian Arthur Schlesinger’s account of those years, when then President Herbert Hoover suggested a good joke, good song or good poem could shake the country from its decline. And the 82-year-old dean of the House, Rep. John Dingell (D-Mich.), recalled serving as a page in the chamber when his father was a congressman in the 1930s.

“Hardship was terrifying. It was the worst economic experience in the history of this country,” Dingell told the House. “Let’s learn from history, my dear friends and colleagues.”

“Those who have studied that Depression tell us that had Congress acted, or the administration acted with vigor, that the Depression would have been much shorter and much less severe. We have a chance to learn from that experience.”
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