Democratic senators agreed on Friday on a scaled-back $780 billion fiscal stimulus package, a potentially big win for President Barack Obama but undercut by scant Republican support. Democrats said a vote on passage of the measure, drafted by leaders of a group of moderate lawmakers from both parties, and closely watched internationally as a sign of U.S. commitment to help revive the world economy, would be held by early next week.
"We do not want this recession we're in to march into a depression," said Senate Majority Leader Harry Reid, a Nevada Democrat, confident he had the votes for passage.
With the United States in the grip of the worst economic crisis in more than 70 years -- a report on Friday showed nearly 600,000 jobs were lost in December -- Obama has demanded that a bill be put on his desk by February 16.
After five days of negotiations, Democrats agreed to more than $150 billion in cuts to their earlier $937 billion proposal to trim what critics, most of them Republicans, called billions of dollars in unwarranted spending.
"We've got a deal," Senator Sherrod Brown declared after a meeting with fellow Democrats on the measure.
Democratic Senator Ben Nelson, a leader of the group, said the stimulus would help to jolt the struggling economy through middle-class tax cuts and targeted investment.
"We trimmed the fat, fried the bacon and milked the sacred cows," he said on the Senate floor.
The Senate met as official data showed U.S. job losses accelerating in January and the unemployment rate surging to a 16-year high.
Despite that news, U.S. stocks rallied for a second day on Friday partly in anticipation of a possible accord on the stimulus.
If the measure passes, lawmakers would have to resolve differences between it and an $819 billion version of the legislation approved last week by the House of Representatives without a single Republican vote.
Once a final bill is crafted and passed by both chambers, the measure would be sent to Obama to sign into law.
JUST ENOUGH SUPPORT
Senate Finance Committee Chairman Max Baucus said the compromise plan would pass with the support of three or four Republicans in the 100-member chamber -- a far cry from the broad bipartisan backing Obama had originally hoped for.
Senate Minority Leader Mitch McConnell denounced the pact and predicted it would do little to stem the recession.
"No action is not what any of the Republican colleagues that I know are advocating, but most of us are deeply skeptical that this will work," McConnell said.
Republican Senator John McCain, whom Obama defeated in last year's presidential campaign while promising to work with Republicans, scoffed at the measure and Obama's vow.
"You can call it a lot of things but bipartisan isn't one of them," McCain said.
Pennsylvania Republican Senator Arlen Specter also voiced criticism of the measure, but said, "I do believe that we have to act and I believe that under all the circumstances this is the best we can do and we ought to do it."
Massachusetts Democrat John Kerry said the compromise price tag would be made up of 42 percent tax cuts and 58 percent in new spending. "It's a good balance," he said.
While a deal on the measures marks a solid start for Obama, who took office on January 20, the largely party-line support in the House and Senate was a setback in his drive to foster a new spirit of bipartisan cooperation in Washington.
Opponents complained much of the new spending amounted to little more than a liberal wish list, and more should have been devoted to tax relief and job-creating construction projects instead of new rounds of other government spending.
SPENDING LOTS, FAST
Obama had said he could accept a package in the $800 billion range and that failure to act could turn crisis into catastrophe. He rejected demands for wholesale changes by Republicans, saying it was their policies that created the crisis in the first place.
It was unclear how the deal would affect changes already adopted by senators, including adding an $11 billion tax break for automobile sales and a $19 billion tax incentive for homebuyers. Conrad said they would remain but other senators said they were not included.
He also said that some 80 percent of the package would be disbursed over the first two years, higher than the 75 percent Obama had sought. He also said that money for school construction would be eliminated in the legislation.
Details of the administration's other major initiative to address the crisis -- how it will spend the remaining $350 billion of a bank rescue program agreed to under former President George W. Bush -- are due to be announced on Monday.
A source with knowledge of the plan told Reuters the measure would offer to insure some distressed assets held by banks, authorize the government to purchase others and spend up to $100 billion to buy and modify troubled homeowner mortgages.
http://www.reuters.com
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