16 January 2009

Congress Moves on Help for Ailing Economy

Obama likely to have economic medicine at his disposal quickly

Renewable-energy projects, such as this wind turbine installation in Ohio, are likely to get a boost from the stimulus bill.

Washington – Congress moved to prevent the U.S. economy from getting worse by launching debate on a huge economic stimulus plan and by voting to make the rest of the financial rescue funds available to incoming President Barack Obama.

Democratic leaders in the House of Representatives unveiled January 15 an $825 billion economic recovery bill aimed at halting the slide of the U.S. economy and stemming job losses. The Senate is working on its own version of the measure.

House Speaker Nancy Pelosi presented the stimulus proposal as the first step in the legislative process, which is likely to involve intense haggling over the details and the cost of the measure between Democrats and Republicans in Congress, between the House and the Senate, and between the Congress and the new administration. Congressional observers believe the cost of the package is likely to grow before a final version ready for a vote.

To become law, the bill must be approved by both chambers and signed by the president.

Congressional Democrats, who are a majority in both the House and Senate, hope to pass the stimulus bill by mid-February.

The bulk of the money — about $550 billion — would support spending on infrastructure, renewable energy, health care and educational projects as well as on the social safety net. The rest of the money would cover tax cuts that would offer relief for businesses and middle-class taxpayers.

“We have more money for investments because we believe that is where job creation is greater,” Pelosi said.

Most economists agree that stimulus funds should be spent quickly and efficiently to have a significant effect on the economy.

Democratic leaders expect the money largely to be spent over the next two years.

Obama, who has pressed for sizable public spending to help the economic recovery, hailed the package as “a significant down payment on our most urgent challenges.”

Although the main provisions are similar to what he sought, he did not get everything. For example, his idea of tax cuts tied to jobs created or retained by companies is missing from the proposed bill. This and another of Obama’s tax-cutting ideas were supported by congressional Republicans, who expressed disappointment over the content and the high cost of the Democratic measure.

House Minority Leader John Boehner criticized the lack of bipartisanship in shaping the bill, saying it “appears to be grounded in the flawed notion that we can simply borrow and spend our way back to prosperity.” House Republicans are working on their own version of a recovery plan.

CAPITAL MARKETS REMAIN CONCERN

In a separate action on the same day, the Senate voted to release the second part of the $700 billion financial rescue fund approved by Congress in October 2008. Because the release of the remaining $350 billion could have been blocked only by disapproval of both chambers, the Senate’s vote, in practice, makes the money available to Obama once he takes office January 20.

Many economists believe the new president will need the rescue money quickly to further stabilize the ailing financial sector. In recent days, the U.S. central bank and government came to the rescue of two financial giants — Citigroup and Bank of America — with cash and guarantees on troubled assets.

The Senate vote is an early win for Obama, who sought the funds and personally cajoled his former Senate colleagues from both parties. Many of them are frustrated by the way the Bush administration used the first $350 billion, which was made available as the Troubled Asset Relief Program.

The summary (PDF) and full text (PDF) of the stimulus bill can be viewed on the House of Representatives Web site.