Senate Stimulus Compromise

Obama’s bipartisan dream turns sour
By Edward Luce in Washington
Published: February 8 2009 22:49 Financial Times

It did not take long for Barack Obama to crave the wind in his hair again.

Several weeks of Sisyphean efforts at building a bipartisan consensus on his $800bn stimulus plan appear to have won the White House very little support from an increasingly hostile opposition. Of the 218 elected Republicans on Capitol Hill, just three have come out in support of the president’s plan – and even their support cannot be guaranteed.

With an increasingly now or never urgency to his efforts, Mr Obama will on Monday take his case to the voters in Elkhart, Indiana, in the kind of “town hall” setting that was a daily event during his 21-month election campaign. In Tuesday he will repeat the performance in Florida. And tonight he holds his first prime-time presidential press conference. There is no guarantee that any of this will work. In spite of pushing his Democratic colleagues in the Senate to broker a compromise with the three Republicans on Friday night that cut more than $100bn (€78bn, £68bn) in spending from the stimulus package and added in new tax cuts, most Republican opposition appears only to have hardened over the weekend.

More than 40 per cent of the $827bn Senate bill comes in the form of tax cuts, compared with 30 per cent in the $819bn bill that passed the House.

Senate version of the bill

● Tax cuts: $281bn, of which $145bn goes on a $500 refundable tax credit to middle class individuals and $1,000 to middle class families. Another $70bn will address the alternative minimum tax to avoid unexpected tax rises for families

● Help for individuals: $263bn mostly in an extension of unemployment insurance and food stamps

● Direct spending: $283bn mostly budget aid to state governments and infrastructure projects

● Cut from House of Representatives’ plan: $40bn in education aid to states and $20bn in high school construction programmes

● Key fact: 30 per cent of the $819bn House version of the bill is in tax cuts, compared with more than 40 per cent in the $827bn Senate version

“We’re going down a road to disaster,” Richard Shelby, the senior Republican on the Senate banking committee, said on Sunday. “There’s got to be some other way better than what we’re doing. Not the socialist way but to try and get our free market working again.”

Nor do Mr Obama’s efforts appear to be winning applause from his own support base, which is increasingly agitated about the substance of the compromises that were agreed in the Senate.

Liberal economists point to the fact that the $40bn in education aid to state governments was among the most stimulative elements in the original bill. Even Lawrence Summers, Mr Obama’s chief economic adviser, on Sunday sounded disappointed, pointing out that the several billion dollars that was cut in aid to higher education would have fed rapidly through into the economy.

“Look, I have children at college,” Mr Summers told Fox News.

“And I know that if you put money in their pocket it won’t be saved ... The president was very strongly criticised by many in his own party – he cannot do any more [than he has so far] in walking down the road to bipartisanship.” Mr Obama’s next priority is to ensure that Harry Reid, the Senate majority leader, wins a cloture vote on Monday afternoon to put an end to further debate in the Senate.

Should Mr Reid achieve that – which would require the support of the three Republicans who negotiated Friday night’s compromise, Arlen Specter of Pennsylvania and the two senators from Maine, Susan Collins and Olympia Snowe – then the final passage of the bill on Tuesday ought to be a formality.

That would leave two critical hurdles to clear, which could take at least several more days of valuable time. First, the Senate and House versions must be “reconciled” in a bicameral conference. This is where the White House and House Democrats may try to restore some of the spending cuts that were lost in the Senate. Then the reconciled version must be passed by both houses.

Again, Mr Reid will need 60 votes in the Senate to prevent a Republican filibuster. “We fully understand the criticisms of some economists about this compromise,” said a senior Democratic staffer on Sunday. “But they don’t have to get the bill passed. If we unpick the compromise in the final version then we could be back to square one.”

After the compromise was announced on Friday, John McCain, the former presidential candidate, pronounced his verdict on Mr Obama’s bipartisan efforts.

If Mr McCain’s words are any guide at all, Mr Obama faces an even rockier week than the last one.

“I’ve been involved in a lot of bipartisan legislation around here,” Mr McCain said. “But I guarantee you, this is not bipartisan.”