Obama sweetens stimulus package
James Puzzanghera and Christi Parsons Tribune Washington BureauSouth Florida Sun-Sentinel
In pursuit of his twin goals of reviving the economy and transforming the political climate in Washington, president-elect Barack Obama not only wants quick congressional action on his mammoth stimulus package but also significant numbers of Republicans to join in voting for it.
And to get GOP support, Obama has decided to include as much as $100 billion in new tax breaks for businesses - a proposal that's not at the top of the list of stimulus measures for most Democrats.
But despite Obama's active courtship of Republicans, both in the tax cut proposal and in a meeting that included GOP leaders on Capitol Hill on Monday, the reaction suggested he still faces obstacles to getting bipartisan support for his economic recovery plan.
Cutting taxes has long been a Republican mantra. Obama is proposing to devote $300 billion to tax cuts in a stimulus package that may total $775 billion. Final details of the package are still being worked out, but about half of those cuts would be tax credits of up to $500 for workers earning less than $200,000.
What surprised many liberals was that the plan also contains about $100 billion in business tax cuts that many conservatives have been advocating.
Republican leaders reacted positively.
"I think he would like to have a large bipartisan vote in favor of this package. And he knows, even before we mentioned it, that the way to do that is obviously for it to have elements that are appealing to Republicans," Senate Minority Leader Mitch McConnell, R-Ky., said after a 90-minute meeting Obama held with Democratic and Republican congressional leaders Monday.
"I think he's already been listening to the suggestions we've made."
At the same time, McConnell and House Minority Leader John Boehner, R-Ohio, said they were not ready to endorse the overall stimulus proposal.
And other high-level Republicans voiced concern about the plan's effect on the deficit.
Obama said he was looking for a balanced stimulus plan that addressed the needs of businesses as well as consumers and he hoped Congress would pass the legislation by the first week of February.
"It's clear that we have to act and we have to act now to address this crisis and break the momentum of the recession or the next few years could be dramatically worse," Obama said. "And the most important message today is that the situation is getting worse, we've got to act boldly, and we've got to act swiftly. We cannot delay."
Democratic congressional leaders pledged to move quickly.
"We know what the time constraints are," said House Speaker Nancy Pelosi, D-Calif. "They are dictated by the sense of urgency that the American people have about their economic well-being."
Obama will provide more details of the stimulus plan in a speech later this week. The majority of the stimulus plan would be new government spending, with a focus on roads, bridges and other infrastructure projects.
He said the bulk of the proposed tax cuts reflected his campaign pledge to help middle-class families.
"There is a happy convergence between what I had pledged during the campaign and what's required for the economy, right now, to put more money into the pockets of ordinary Americans who are more insecure about their jobs, who are continuing to see rising costs in an area like health care, who are struggling to make ends meet," Obama told reporters after a meeting with his economic team Monday.
The largest component would be a refundable tax credit of $500 for most individuals and $1,000 for married couples. The credit, which Obama outlined during the campaign, would reduce the Social Security payroll taxes that are automatically withheld from people's paychecks.
People earning more than $8,000 a year would get the full cut, according to the official. Those earning more than $200,000 would not qualify. If Congress passes the stimulus package quickly, people would see the change in their paychecks by mid-year.
"So if you were a married couple and your tax credit was $1,000, then just as soon as the IRS can make that change you would see your paycheck go up by $40 every other week," a transition official said, declining to be named because he was not authorized to discuss the stimulus plan publicly.
The tax incentives for businesses are designed to encourage creation of jobs and investment in equipment; a new jobs tax credit is intended to encourage employers to keep or hire more employees.
Small businesses would be allowed to deduct up to $250,000 of their expenses through the end of 2010, a two-year extension designed to free capital for new investments. The plan also would extend net operating losses to five years, to make it easier for businesses to borrow money to get through the economic crisis.
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