Published January 30, 2009

Round 1 to Obama amid glaring divide

Republicans remain sceptical as stimulus bill gets safe passage through House

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(WASHINGTON) Without a single Republican vote, President Barack Obama won House approval on Wednesday for an US$819 billion economic recovery plan as congressional Democrats sought to temper their own differences over the enormous package of tax cuts and spending.

As a piece of legislation, the two-year package is among the biggest in history, reflecting a broad view in Congress that urgent fiscal help is needed for an economy in crisis, at a time when the Federal Reserve has already cut interest rates almost to zero.

But the size and substance of the stimulus package remain in dispute, as House Republicans complained that it tilted heavily toward new spending instead of tax cuts.

All but 11 Democrats voted for the plan and 177 Republicans voted against it. The 244-188 vote came a day after Mr Obama travelled to Capitol Hill to seek Republican backing, if not for the package then on coming issues.

Mr Obama, in a statement hailing the House passage of the plan, did not take note of the partisan divide but signalled that he expects changes to be made in the Senate that might attract support.

'I hope that we can continue to strengthen this plan before it gets to my desk,' he said. 'But what we can't do is drag our feet or allow the same partisan differences to get in our way. We must move swiftly and boldly to put Americans back to work, and that is exactly what this plan begins to do.'

While there are plenty of spending measures in the legislation aimed at directly helping generate economic growth and assisting people in need, from US$275 billion in temporary tax cuts to US$300 billion in assistance to the unemployed and to cash-strapped states reeling from the economic downturn.

But it is the litany of other, seemingly non-emergency items that is upsetting some stomachs on Capitol Hill, like the US$15.6 billion in Pell grants for low-income college students, US$600 million to buy new cars for government workers and US$150 million in repairs to the Smithsonian Institution.

Alabama Republican Senator Jeff Sessions, a conservative, called the bill a huge mistake that he would vote against. 'I'm convinced that they (Democrats) are seizing this as an opportunity to fund programmes to a degree that they could never have funded before simply by calling it a way to create jobs.'

House of Representatives Speaker Nancy Pelosi, a California Democrat, has a letter of support for the bill from 146 economists, including five recipients of the Nobel Prize for Economics. Democrats argue the legislation will do what it is intended to do - give the economy a fast jolt.

'I can only tell you what the experts are telling us,' said Florida Democratic Senator Bill Nelson, 'that somewhere around 70 per cent of the spending will occur within the first 12 or 14 months. And that's stimulative.'

On the other hand, the libertarian Cato Institute has its own list of opposing economists, about 200 of them, who argued in a full-page newspaper advertisement that 'it is a triumph of hope over experience to believe that more government spending will help the US today.'

Ethan Siegal of The Washington Exchange, a private firm that tracks Congress for institutional investors, said the legislation first and foremost was about helping bail out the states. But also, he said, 'It's about Democrats and President Obama trying to put forward and jump-start policy initiatives that they believe in, that they believe the country should be headed in, and that the stimulus package is the best place to do it.'

White House spokesman Robert Gibbs said the critics were focusing on only a small part of a large package. He said: 'I know there is a tendency - and there always will be - to focus on ... 0.02 per cent of a piece of legislation. I have a hard time believing that the 0.98 per cent of the other 99 per cent aren't the large focus of members of Congress.'

As Senate Democrats prepare to bring their version of the package to the floor on Monday, Democrats from the House and the administration indicated they ultimately would accept a provision in the emerging Senate package that would adjust the alternative minimum tax to hold down many middle-class Americans' income taxes for 2009.

Its cost would drive the overall package's tally to nearly US$900 billion, exceeding the roughly US$850 billion limit that Mr Obama has set for Congress.

Many Republicans would normally be inclined to vote reflexively against such a plan. But they are thinking twice about this one because they would be going against the wishes of a popular new president at a time of economic peril and could face a backlash from voters when they come up for re-election.

Democrats say whatever happens, the US$812 billion plan may only be one important step in an even-larger effort to save the economy from collapse.

'We are far from getting to the bottom of this problem,' said Mr Nelson. -- NYT, Bloomberg