Stimulus Agreement

The House And Senate Agree On A Compromise $789 Billion Measure, With Details Still Murky On What Items Were Added And Dropped In The Conference Committee.

After just one day of negotiations, Senate Majority Leader Harry M. Reid [D-Nev.] announced on Feb. 11 that the House and Senate had reached a deal on a revised stimulus plan that calls for $789 billion to be spent over two years. The bill, which represents the largest attempt to jump-start the U.S. economy in modern times, "creates more jobs than the original Senate bill and spends less than the original House bill," Reid said.

Final votes in the House and Senate are expected by the end of this week. Congressional leaders have said they want the bill on President Barack Obama's desk by Monday, Feb. 16.

The bill, which reconciled an $838 billion Senate version and an $819 billion House version, includes relief measures for unemployed and low-income Americans. Those provisions, such as extended unemployment benefits and more funding for food stamps and health coverage, are expected to stimulate the economy right away.

Infrastructure Investment

The bill also contains investment in infrastructure and renewable-energy projects, and it reinstates some of what the Senate bill had cut from the House bill in terms of funding for cash-strapped states and school construction. Final details of the plan -- including the size of various tax cuts, the amount of money granted to states, and the extent of health-care help for the jobless -- were still being determined in discussions Wednesday night.

About 35% of the funding in the revised bill will go toward tax relief for individuals and companies, according to Senator Susan Collins [R-Me.], one of the three moderate Republicans who voted for the original Senate bill, which passed 61 to 37. The revised bill is expected to preserve Obama's "Make Work Pay" tax cut, a break for millions of lower- and middle-income taxpayers. However, centrist lawmakers were pressing to reduce that from $500 a year for most individuals and $1,000 a year for most families to $400 and $800, respectively.

Other reductions were likely for a $15,000 tax credit that was included on the Senate side for all home purchases made over the next year, as well as for an income-tax credit the Senate set for buyers of new cars. The Auto Assistance Ownership Amendment was to allow car buyers an income-tax deduction for the cost of automobile sales taxes and interest payments on car loans. The tax break as defined by the Senate would apply to the first $49,500 in the price of a new car purchased between Nov. 12, 2008, and Dec. 31, 2009. Consumers with incomes of up to $125,000 and couples earning as much as $250,000 could qualify.

The compromise bill is expected to restore some of the aid to states that totaled $79 billion in the House plan. That was cut to $39 billion in the Senate. Some Democrats expressed worry that the final tally of state funding wouldn't be enough; they decried cuts in school construction funds as well. House Democrats were looking to secure as much as $9 billion for school repairs; Senator Tom Harkin [D-Iowa] told reporters that about $6 billion would be set aside, and officials said it could be spent only on repair and modernization work.


Push to Create Jobs

The aid to states was particularly contentious, with some Democrats saying it would deliver some of the biggest bang-for-the-buck in the stimulus bill. A dollar in aid to state governments to stave off cuts in services or layoffs yields $1.36 in total economic payoff, and a dollar in infrastructure investment yields $1.59, according to an estimate by Moodys.com (MCO). That's significantly higher than the boost from tax cuts, according to some economists.

In an appearance to announce the agreement with Senate Majority Leader Reid, Collins told reporters that infrastructure spending in the new bill is robust. She said that in the final version, "we were able to increase the amount of infrastructure spending," which she called "the most powerful component in this bill to create jobs." She said the bill contains about $150 billion for infrastructure, including transportation, environmental, broadband, and other projects.

Advocates for the unemployed said that they were generally pleased with the provisions the stimulus bills proposed to shore up aid. The U.S. unemployment rate swelled to 7.6% in January.

"It's a huge step forward for unemployed workers," says Maurice Emsellem, policy director of the National Employment Law Project, an advocacy group for low-wage workers. However, on Feb. 11 lawmakers were still negotiating whether to include a $10.8 billion provision from the House bill, cut from the Senate bill, that would help unemployed workers maintain health-care insurance.

"It will be disappointing if they don't come through with the Medicaid provision for unemployed workers," says Emsellem. "They need immediate help."
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