House, Senate Make $789 Billion Deal
President Barack Obama’s economic agenda took a big step closer to passage in Congress Wednesday as top Democrats said agreement had been reached with moderate Senate Republicans on a $789 billion two-year package that will be brought to the floor this week.
Senate Majority Leader Harry Reid (D-Nev.) made the announcement flanked by three Republicans whose votes he will need in the Senate, and House Democrats said they hoped to file a final bill Wednesday night or Thursday.
But after working most of Tuesday night, members and staff were plainly exhausted, and continued disputes over Obama’s school construction initiative delayed a planned meeting of the formal House-Senate conference on the bill.
“Like any negotiation this involved give-and-take, and if you don’t mind my saying so, that’s an understatement,” said Reid. Down to the end, the school modernization funds were a bone of contention for Sen. Susan Collins (R.-Maine), whose vote is pivotal to the president.
Last Friday, she had successfully eliminated all such money from the Senate bill. Wednesday she agreed to allow $10 billion as part of a $54 billion fiscal stabilization fund but argued that the $10 billion should not be confined to this single dedicated purpose.
After Reid’s announcement, an administration official said the issue was resolved, as did Collins. But House leaders, who had grown resentful of the Maine Republican’s veto power over the bill, remained unhappy—forcing the delay.
The constructions funds are especially sensitive in poor, often minority school districts less able to finance new schools. Among the many spending cuts made last week in the Senate, the school construction issue was perhaps the most ideological.
For the Obama camp, it brings back New Deal memories of the Public Works Administration creating construction jobs and building schools across the country. But Collins has always resisted arguing that, in today’s world, it represents an expansion of the federal role in state and local affairs.
Reid’s announcement capped a long night of Capitol negotiations in which he worked closely with Speaker Nancy Pelosi (D-Calif.) to clear the last hurdles. After a meeting in the speaker’s office late Wednesday, Reid was confident the school modernization question was behind them. “Language is always tough and that’s what we’ve worked out,” he told Politico.
Driving Reid and Pelosi – and the entire process—is Obama himself. In the last 24 hours the president has stepped forward to put his stamp on the package and defuse intra-party wrangling while also putting new options on the table including scaling back his own tax cuts.
“Basically it is whatever Obama wants,” said one House staffer.
In the face of the continued market turmoil and a troubled economy, action seems a first priority for the administration.
Many details remain unavailable, but by scaling back the package to below the Senate and House passed packages, the administration hoped to gain some latitude as to where the final money would go.
Senate Finance Committee Chairman Max Baucus (D-Mont.) estimated that 35% or $276.1 billion of the bill would be “pure” tax cuts. Included in the package is continued relief for middle and upper middle income taxpayers threatened by the Alternative Minimum Tax.
Rifle shot Senate-passed tax breaks for new car purchases and homebuyers were scaled back to make the numbers fit. Most importantly, the administration agreed to scale back Obama’s signature “Making Work Pay” tax break to $400 for individuals and $800 for couples—down from $500 and $1000 respectively.
White House Chief of Staff Rahm Emanuel came to the Capitol for the talks and both he and Budget Director Peter Orszag spent much of Tuesday shuttling between House and Senate leadership offices.
Just thee Republicans — Collins, Sen. Olympia Snowe of Maine and Sen. Arlen Specter of Pennsylvania — supported the $838 billion, when it passed the Senate Tuesday. Going forward, the president’s challenge was to retain this support while also bridging a rural-urban divide in his own party on issues such as Medicaid funding.
House Energy and Commerce Committee Chairman Henry Waxman (D., Cal.) said the tentative deal calls for 65% of the money to be distributed according to the Senate’s more rural formula; 35% as the more urban House wanted.
In the same talks, the House appears to have preserved its higher 65% subsidy to help laid- off workers meet COBRA payments to maintain employer-provided health insurance; the Senate had proposed 50%. But the House agreed in turn to drop its proposal to increase Medicaid coverage to help lower income individuals face the same insurance dilemma and can’t afford to pay even a subsidized COBRA payment.
To a remarkable degree, Obama has skirted by until now, promoting the competing House and Senate bills and never making public his full requests for new spending and tax breaks. That is beginning to change, just as the past 24 hours have seen the administration take a much more aggressive posture in putting forward its economic program.
Perhaps nothing captured this more than Obama’s televised prime-time press conference Monday night, which was followed Tuesday morning by Treasury Secretary Timothy Geithner’s speech on the continued crisis in the credit markets. Born within weeks of one another in 1961, the two men reflect a new generation of leadership taking the nation — and economy — in new directions in the face of what all agree is a historic and often frightening crisis.
“It is essential for every American to understand that the battle for economic recovery must be fought on two fronts,” Geithner said in his speech in Treasury’s famous Cash Room. “We have to both jump-start job creation and private investment, and we must get credit flowing again to businesses and families.”