DEAL REACHED ON $789 BILLION STIMULUS PACKAGE

Zachary Coile, San Francisco Chronicle Washington Bureau

The final package, likely to be approved by week's end, will be less generous to California than the House version of the bill. But the state will still reap tens of billions of dollars for education, infrastructure, health care costs and other programs.

 

Thursday, February 12, 2009 -- House and Senate leaders, under intense pressure from President Obama, buried their differences over competing economic stimulus bills Wednesday and agreed to a $789 billion package aimed at jump-starting the economy.

The final package, likely to be approved by week's end, will be less generous to California than the House version of the bill. But the state will still reap tens of billions of dollars for education, infrastructure, health care costs and other programs.

At least 12 million California taxpayers will see their payroll taxes cut, although lawmakers trimmed the tax cut from $1,000 to $800 for couples earning up to $150,000, and from $500 to $400 for individuals making up to $75,000.

A $15,000 tax credit for new home purchases, which home builders and real estate interests pushed to revive the housing market, was pulled from the bill. But car buyers will be able to deduct the sales tax they pay on a new vehicle.

The deal was announced in embarrassingly awkward fashion. House Speaker Nancy Pelosi was noticeably absent when Senate Majority Leader Harry Reid stepped to the microphones Wednesday afternoon to say, "The difference between the Senate and House versions we've resolved."

But, in fact, they hadn't.

Pelosi and other House Democrats, including Martinez Rep. George Miller, were still negotiating over key provisions, including trying to boost the amount of money for school construction. White House Chief of Staff Rahm Emanuel, who helped broker the deal, was called in to iron out the differences.

Money for education

By late afternoon, Obama had issued a statement praising the deal. Pelosi stepped out of negotiations briefly Wednesday evening, saying the delay had allowed her to nail down a promise of more money for education.

"We have come to an agreement with the Senate as to how we'll go forward, and I think people are pretty happy about that," she said. "We had to make sure that the investments in education were there."

Lawmakers said the deal would restore about $10 billion in a fiscal stabilization fund for the states, which was cut in half by the Senate. Under the Senate bill, California would have received about $4 billion, and that share could grow by about $1 billion under the compromise.

Governors would be allowed to use the money to modernize public schools but not build new ones.

The deal showed the immense clout of three Republican senators, Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania, who demanded that the price tag be kept under $800 billion. The three moderate GOP members also fought for, and won, more tax cuts and more infrastructure spending.

Spending, tax cuts

The final bill is a mix of about 65 percent spending and 35 percent tax cuts, with roughly $150 billion devoted to spending on highways, bridges, water systems, electricity transmission lines, broadband expansion and other infrastructure projects.

"I'm particularly pleased that we have produced an agreement that has a top line of $789 billion," Collins said. "It is a fiscally responsible number that reflects our efforts to truly focus this bill on programs and policies and tax relief that will help turn our economy around."

But some House Democrats were unhappy with the way the deal was negotiated with the Senate. Rep. Barbara Lee, D-Oakland, chairwoman of the Congressional Black Caucus, said she was upset that tax provisions kept growing even as spending programs to help those hard-hit by the recession were shrinking.

"I'm very disappointed at how the Senate negotiations have gone. ... You have two or three members of the Senate negotiating the bill for the whole country," she said.

Details are unclear

Details were still sketchy Wednesday night, but Lee said she was pleased to hear some money had been restored for education and for a program to help communities buy foreclosed properties.

"We want to support the president. We know this is not a perfect package," she said. "We were very disappointed it didn't go further in the negotiations in alleviating suffering ... but we understand the political realities of what is taking place."

The final bill includes a $70 billion provision to keep the alternative minimum tax from hitting upper-middle-class taxpayers, a provision the Congressional Budget Office said would do little to stimulate the economy.

But the measure also provides $14 billion for one-time $250 payments to Social Security recipients, poor people on Supplemental Security Income, and veterans receiving disability and pensions, all of whom are seen as likely to spend the money quickly.

House Republicans denounced the deal. House Minority Leader John Boehner, R-Ohio, said, "It appears that congressional Democrats have made a bad bill worse by reducing tax relief for working families to pay for more wasteful government spending."

Stimulus compromise

Highlights of a nearly $789 billion version of President Obama's economic recovery plan agreed to by Democrats and moderate Senate Republicans. Additional debt costs would add about $330 billion over 10 years. Many provisions expire in two years.

Spending

-- Aid to poor/unemployed: $40 billion to provide extended unemployment benefits; $20 billion to increase food stamp benefits.

-- Direct cash payments: $14 billion to give one-time $250 payments to Social Security recipients, poor people on Supplemental Security Income, and veterans receiving disability and pensions.

-- Infrastructure: $46 billion for transportation projects; $8.4 billion for mass transit; $8 billion for construction of high-speed railways and $1.3 billion for Amtrak; $4.6 billion for the Army Corps of Engineers; $4 billion for public housing improvements; $6.4 billion for clean and drinking water projects; $7 billion to bring broadband Internet service to underserved areas.

-- Health: $21 billion to subsidize insurance premiums for the unemployed under the COBRA program; $87 billion to help states with Medicaid; $19 billion to modernize health information technology systems.

-- State aid: $5 billion to help states defray budget cuts.

-- Education: $54 billion in state fiscal relief to prevent cuts in state aid to school districts, with up to $10 billion for school repair; $26 billion to school districts to fund special education and the No Child Left Behind law for students in K-12; $17 billion to boost the maximum Pell Grant by $500 to $5,350; $2 billion for Head Start.

Taxes

-- New tax credit: Approximately $115 billion for a $400 per-worker, $800 per-couple tax credits in 2009 and 2010.

-- AMT: About $70 billion to spare about 24 million taxpayers from being hit with the alternative minimum tax in 2009.

-- Home buyer credit: $3.7 billion to repeal a requirement that an $8,000 first-time home buyer tax credit be paid back over time for homes purchased from Jan. 1 to Aug. 31, unless the home is sold within three years.