Senate passes economic recovery plan

WASHINGTON Within hours of the 61-37 Senate vote, White House Chief of Staff Rahm Emanuel, Budget Director Peter Orszag and other top aides to President Barack Obama met in the Capitol with Democratic leaders as well as moderate senators from both parties whose support looms as crucial for any eventual agreement.

A top priority for Obama is to restore money to build and repair schools and to give cash-starved states more help with their budget problems. Almost $60 billion for those two programs alone was cut at the insistence of GOP moderates last week in a bargain that was crucial to getting their votes.

The moderates -- Olympia Snowe and Susan Collins of Maine and Arlen Specter of Pennsylvania -- are demanding that the final bill resemble the Senate measure, which devotes about 42 percent of its $838 billion in debt-financed costs to tax cuts, including Obama's signature $500 tax credit for 95 percent of workers, with $1,000 going to couples.

The $820 billion House measure is about one-third tax cuts.

The GOP moderates also want the final bill to retain a $70 billion Senate plan to "patch" the alternative minimum tax, or AMT, for one year. The provision would make sure 24 million families won't get socked with unexpected tax bills more than a year from now during the 2010 filing season.

The AMT was designed 40 years ago to make sure wealthy people pay at least some tax, but is updated for inflation each year to avoid tax increases averaging $2,300 a year. Fixing the annual problems now allows lawmakers to avoid difficult battles down the road, but economists say the move won't do much to lift the economy.

Obama and his Democratic allies go into final negotiations on the economic rescue package with limited ability to make it more to their liking after the moderate Republicans -- with support from Democrats such as Ben Nelson of Nebraska -- wrung savings totaling $108 billion in spending from the measure.

The Senate moderates are essential if the final plan is going to pass and get to Obama's desk, so they're playing hardball. "My support for the conference report on the stimulus package will require that the Senate compromise bill come back virtually intact," Specter warned in a statement.

House Democratic leaders promised to fight to restore the school construction money. Those funds could create more than 100,000 jobs, according to Will Straw, an economist at the liberal Center for American Progress. He said the $40 billion cut in aid to state governments would mean 183,000 fewer jobs would be created under the plan.

Senate Finance Committee Chairman Max Baucus, D-Mont., said a provision that would award anyone buying a home a tax credit of up to $15,000 would have to be scaled back sharply. It carries a $39 billion cost and was sponsored by Sen. Johnny Isakson, R-Ga., who voted against the legislation despite the inclusion of the housing credit.

A tax break for car buyers costing $11 billion was also in danger of being dropped, as was a provision limiting the compensation of top-ranking executives at companies receiving bailout funds. It carries a cost to the government, also estimated at $11 billion over a decade in lost tax receipts from the executives.

The Senate has a well-earned reputation for emerging the winner in most House-Senate negotiations, since its rules make passing bills more difficult and typically require bipartisan votes.

Senators tell the House that it's difficult for them to pass anything that departs from carefully wrought agreements.

Hence the likelihood the final measure will greatly resemble the Senate bill.

"I think they've got a lot of influence on the outcome," said Sen. Kent Conrad, D-N.D. "It has to do with the simple reality of getting the votes to pass. And whether somebody likes it or doesn't like it, there's a thing called reality."

House leaders are tempering expectations that they'll restore many of the cuts.

"You cannot allow the perfect to be the enemy of the effective and of the necessary, and we will not," House Speaker Nancy Pelosi, D-Calif., said

At the same time, Specter is fighting to preserve an enormous $10 billion increase for the National Institutes of Health, while Collins obtained $870 million for community health centers in talks last week.

Reid promised great progress during just the first 24 hours of talks, and the hope is to reach a deal quickly in order to get the plan to the White House within days. But across the Capitol, some top Democrats warned negotiations will probably drag into next week, when Congress is supposed to be on vacation.

The competing House and Senate plans have the same basic components designed to ease the worsening recession: hundreds of billions of dollars in government money to boost consumption and tax cuts designed to increase consumer spending and prod business investment.

Obama's allies recognize some of his priorities will be shaved.

But they're not happy about it.

"I would say there's not one member in there who's not chafing," said Rep. John Yarmuth, D-Ky., as he left a closed-door Democratic caucus. "Everybody's upset about the school construction."

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