House Set to Vote on Obama’s $816 Billion Fiscal Stimulus Plan

House Set to Vote on Obama’s $816 Billion Fiscal Stimulus Plan

Jan. 28 (Bloomberg) -- The U.S. House is set to approve today President Barack Obama’s proposed $816 billion economic stimulus package aimed at wresting the economy out of recession through a combination of tax cuts and $604 billion in spending.

The measure will face tougher sledding in the Senate where Republicans, who say the plan includes too much spending and not enough tax cuts, have more power to demand changes. Senate Democrats also are backing alterations to the House bill.

Obama ventured to Capitol Hill yesterday to lobby reluctant Republicans in an effort to get a bill to his desk by mid- February with bipartisan backing.

“The American people expect action; they want us to put together a recovery package that puts people back to work,” Obama told reporters. “I don’t expect 100 percent agreement from my Republican colleagues, but I do hope that we can all put politics aside and do the American people’s business right now.”

In a sign of the difficulties Obama may face, the Senate Finance Committee voted yesterday to add a $70 billion alternative minimum tax cut his administration had wanted to keep out of the package. Democrats also dropped provisions opposed by Republicans that would have made it easier for state governments to distribute contraceptives to the poor.

Senate Minority Leader Mitch McConnell, a Kentucky Republican, said his colleagues will seek more changes once the bill comes over from the House. “We will have a number of suggestions,” and “we’re going to continue to try to encourage the majority here in the Congress to incorporate a number of our ideas,” McConnell told reporters.

Senate Passage Predicted

Peter Orszag, head of Obama’s Office of Budget and Management, yesterday dismissed concerns that the bill would stall in the Senate. “I don’t think that’s going to happen,” Orszag said in a Bloomberg Television interview. “We’re going to get a package that passes the Senate.”

In pressing for speedy approval of the stimulus, Obama has cited announcements by U.S. companies, including Caterpillar Inc. and Home Depot Inc., that they are cutting at least 77,000 jobs because of withering sales amid the recession. The nation lost 2.6 million jobs last year, and economists surveyed by Bloomberg News forecast the unemployment rate will rise to a 26-year high of 8.4 percent by the end of 2009.

‘Substantial’ Boost

Congressional Budget Office Director Doug Elmendorf told lawmakers yesterday that the House plan would provide a “substantial” boost to the economy. Appearing before the House Budget Committee, he said the measure would likely increase the nation’s gross domestic product by between 1.2 percent and 3.5 percent by the fourth quarter of 2010, and that it would boost employment by between 1.2 million and 3.6 million jobs.

Elmendorf also said the Obama administration is likely to fall short of its goal of pumping 75 percent of the stimulus into the economy within 18 months. He estimated that about $526 billion, slightly less then two-thirds of the package, would be funneled into the economy by the end of 2010.

Calculations by his nonpartisan office also estimated that the plan as crafted by House Democrats, in consultation with Obama and his aides, would total $816 billion, including $212 billion in tax cuts. Democrats pegged their plan at $825 billion, of which $275 billion would be tax reductions. Elmendorf said the plan’s cost would top $1 trillion because of additional interest payments it would generate over the next 10 years.

Today’s House vote is likely to be largely along party lines after Republican leaders, even as Obama was making his lobbying effort, urged their members to oppose the plan. Democrats control the chamber, 255 to 178.

Republican Critics

Republican critics of the stimulus package have said that although administration officials talked of tax cuts comprising 40 percent of it, the study by the CBO showed tax cuts accounted for one-quarter of the bill. Republicans also complain that the CBO report found that about half of the $604 billion in government spending won’t occur until after 2010.

“We don’t question the urgency of this package -- we question its priorities and its price tag,” said Representative Jerry Lewis of California, the top Republican on the House Appropriations Committee. “Spending should be targeted to key infrastructure investments that will create jobs over the next two years.”

The differences aside, Obama won praise for coming to the Capitol to meet with the opposition party just days after his inauguration.

“The man’s been president for one week, and he’s already appearing before the Republican conference, and that’s significant,” said Representative Don Manzullo, an Illinois Republican. “I’ll probably still vote against the bill, because it doesn’t reach manufacturing, but that doesn’t mean there won’t be another opportunity. He’s established a dialogue.”

Tax Centerpiece

The centerpiece of the tax portion of the plan is a $140 billion proposal to provide a $500 payroll tax cut to individuals and $1,000 for families.

The stimulus plan would provide money for scores of initiatives, including $40 billion to extend health care coverage to the jobless, $20 billion for school repairs, $30 billion for highway infrastructure projects, $20 billion for food stamps, $18 billion for Pell college tuition grants, and $18.5 billion for energy efficiency and renewable energy programs.

Republicans complained the plan included items unrelated to boosting the economy, including $1 billion for the 2010 census and $400 million to study global warming.

Other provisions would require that the iron and steel used in construction projects funded by the bill be produced in the U.S. unless the material proved unavailable or prohibitively expensive. The bill would also bar embattled Illinois Governor Rod Blagojevich from having any say in how to spend money his state receives from the plan. The Illinois state legislature would be required to approve the expenditures.

The bill is H.R. 1.

BLOOMBERG