Obama Plan Hits the House Floor

President Barack Obama’s economy recovery plan hits the House floor Wednesday after a day of final adjustments by Democrats, adding more tax relief in the Senate and excising a handful of expenditures that have drawn the ire of conservatives.

House-Senate differences over the distribution of Medicaid funds in the bill broke into the open Tuesday night in the Senate Finance Committee. But when the dust settled, the president’s plan was through committees in both chambers, setting the stage for floor debate and what promises to be a pivotal set of negotiations next month

Rising above the fray Tuesday — but almost omnipresent — was Obama himself, meeting with rank-and-file House and Senate Republicans and making his case that the floor votes ahead are just the first steps in a larger action plan to address financial regulations, home foreclosures and banks teetering near insolvency.

“His presentation was a tour de force,” New Hampshire Sen. Judd Gregg told Politico. The top Republican on the Senate Budget Committee, Gregg has been an outspoken critic of the level of new spending in the administration’s plan but said: “I felt much better. ... He’s clearly moving forward aggressively on all the different fronts. I was very impressed. If he puts it in the context of an integrated effort, I’d consider it.”

In his meetings with Republicans, Obama hinted he will take steps soon to give relief to homeowners facing foreclosure, and Democrats expect a major commitment of Treasury rescue funds to be announced next week.

“The statistics every day underscore the urgency of the economic situation. The American people expect action,” Obama told reporters between meetings. The $825 billion package, almost certain to pass the House Wednesday, is “just one leg in a multi-legged stool.”

“We’re still going to have to have much better financial regulation,” Obama said. “We’ve got to get credit flowing again. We’re going to have to deal with the troubled assets that many banks are still carrying and that have locked up the credit system. We’re going to have to coordinate with other countries because we now have a global problem.”

“I am absolutely confident that we can deal with these issues, but the key right now is to keep politics to a minimum.”

Winning over a fiscal conservative like Gregg would be a major step forward, given the respect that the New Hampshire conservative commands in his party. The president’s immediate task is to broaden support so that his “stool” doesn’t collapse under him before he has secured the first leg.

The biggest single change Tuesday came when the Senate Finance panel adopted a $69.8 billion amendment by the top Republican, Iowa Sen. Chuck Grassley, to protect often upper-middle-income families from the alternative minimum tax. But many of the smaller adjustments were colorful tales in themselves as Democrats and the new White House team struggled to make peace with Republicans — and sometimes with one another.

Obama and his often stormy Chief of Staff Rahm Emanuel interceded in the House to strike a provision related to the purchase of contraceptives with Medicaid funds. A $200 million appropriation in the House bill to improve the National Mall in Washington was dropped after pressure from Blue Dog fiscal conservatives. At the same time, the Senate Appropriations Committee leadership stepped in to dramatically scale back an Obama-backed proposal to devote as much as $2.6 billion for the purchase of new energy-efficient vehicles for the government’s fleet.

As recently as Friday, the committee had included the funds in a press release. But when the final bill was made public Tuesday, the vehicle purchases had been cut back to $600 million, with $2 billion instead devoted to high-speed rail corridors. “We would have been killed,” Senate Appropriations Committee Chairman Daniel Inouye (D-Hawaii) told Politico. “Someone didn’t think that out very well.”

General debate in the House began late Tuesday, even as the Democratic leadership finalized what changes would be made through the Rules Committee — and what amendments would be permitted for Republicans.


With her commanding majority after November’s election, House Speaker Nancy Pelosi (D-Calif.) is more in control, and this affords her more discretion to allow debate. The Rules panel thus granted Republicans the chance to offer a handful of amendments as well as a substitute that will focus largely on tax cuts.

Pelosi must be mindful still of restless Blue Dog fiscal conservatives in her own ranks, and several scenarios were in play, either to drop some expenditures or promise greater fiscal discipline in the future.

White House Budget Director Peter Orszag was enlisted for this purpose. And in a sternly worded three-page letter — released Tuesday — he warned that “this recovery and reinvestment plan is an extraordinary response to an extraordinary crisis” and should not be seen “as an opportunity to abandon the fiscal discipline that we owe each and every taxpayer in spending their money.”

“Furthermore, the president is committed to paying for any of the temporary tax cuts included in the recovery plan that he would like to make permanent and will detail the manner of doing so in his budget submission.”

Senate floor action won’t begin before Friday, but the bill had cleared both Appropriations and Finance by Tuesday night. Between taxes and entitlement programs, Finance controls more than half of the measure and the 14-9 vote was a victory for Chairman Max Baucus (D-Mont.) who held his party together and picked up one Republican, Sen. Olympia Snowe of Maine.

But the Medicaid fight is a serious one for his party and dashes any expectation of a quick conference or speculation that the House could simply take the Senate bill. Large states with high unemployment had been promised a greater share of bonus payments for Medicaid under the House bill. Baucus tried to hold together this compromise but was overridden by a combination of Republicans and more rural state Democrats from Arkansas, New Mexico, and North Dakota. And the outcome is sure to anger urban Democrats in the House.

Going forward, the chairman’s long courtship of Snowe could pay political dividends, and the typically soft-spoken Maine moderate was direct and forceful in giving her endorsement.

“We are in the vanguard of creating the jobs for the 21st century,” Snowe said. “I think we have a twofer here, Mr. Chairman. I think we have the possibility of economic stimulus as well as economic transformation.”

But the sheer size of the package is overwhelming for many Republicans, who are distrustful of government spending in any case. And unless Obama can make his argument in some larger context — as Gregg felt he did Tuesday — it will be a very difficult sell.

The long-term debt service costs of paying for the $825 billion commitment are estimated to be near $347 billion — nearly the size of the appropriations portion reported by Inouye’s panel. And even as he voted to send the bill to the Senate floor, Mississippi Sen. Thad Cochran, the ranking Republican, said he remained “extremely wary” of the package.

“We need to remember that acting boldly does not necessarily translate into success. ... There are trade-offs between alacrity and prudence,” Cochran said. “The fact remains that we are effectively being asked to take a leap of faith that this massive amount of spending will in fact stimulate a suffering economy despite evidence that much of the funding will not be spent in the next year or two.”

As Cochran’s comments reflect, the rate at which the money will be pumped into the economy remains an issue as well.

The Congressional Budget Office reported Monday night that only about two-thirds of the House bill will reach the real economy in the first 18 to 19 months — falling short of the administration’s goal. But Inouye and the Senate Appropriations panel have made adjustments that give them a better score than the House from CBO. And with the addition of the added tax relief in the Finance panel, Democrats were confident that the Senate bill would meet the test that 75 percent of the total money would be out into the economy by Oct. 1, 2010.

Do you think that this plan will #1 pass the House, #2 work.
Any ideas of your own on how to solve the crisis?