Highlights
– House of Representatives passed stimulus bill on January 28, 2009
– Senate leaning towards Republican amendments
– Congress likely to expedite a decision in coming weeks
The Democrat House of Representatives passed its version of the stimulus bill on January 28, 2009. The bill still requires approval by the Senate, which has proposed a separate version of the package. The Senate version of the bill will likely include greater Republican influence, especially regarding additional investments into housing and infrastructure sectors. Urgency for the economic stimulus will likely cause both houses to expedite the passage of a strong and effective package within the next two weeks.
Background
The current stimulus package passed by the House approaches $819 billion without interest. That figure includes the American Recovery and Reinvestment Plan (ARRP) for $365 billion.
The ARRP focuses on five areas critical to rebuilding economic growth in the long-term – Infrastructure and Science, Education and Training, Energy, Protecting the Vulnerable, and Health. The Senate estimates that the plan will likely create or sustain over 4 million jobs if passed.
Tax provisions of the ARRP are designed to provide $275 billion in fiscal year 2009. The areas targeted are as follows:
1. Recovery for Individuals
2. Reinvestment in Renewable Energy
3. Recovery for Businesses
4. Manufacturing Recovery
5. Economic Recovery Tools
6. Recovery for State and Local Government
7. Other Recovery Relief
Party Cooperation
On January 1, 2009, Senator Charles Schumer of New York (D), and several other Democratic Senators indicated that they are considering incorporating several Republican amendments into the stimulus bill, specifically regarding housing and infrastructure enhancements.
Democrats have already removed two provisions from the House bill that included $200 million dollars to renovate the National Mall, as well as a several million dollars towards a family planning program.
Senate Democrats have also showed support for Republican amendments to increase the tax credit for new homebuyers from $7,500 to $15,000, as well as legislation to reduce mortgage rates to 4.5 percent. Additionally, both parties have indicated they expect to appropriate approximately $20 billion to $30 billion in aid towards infrastructure spending on top of the current $140 billion already allocated to subsidize the areas of physical and cyber infrastructure, transportation, public housing, environmental clean-up and clean water, as well as science and space research.
Party Lines
However, Republicans remain concerned that additional spending will add to the final cost of the bill, as the Congressional Budget Office estimates that an $819 billion version of the package will actually approach $1.2 trillion with interest. Republicans highlighted that they wish to keep spending “timely, temporary, and targeted.” Republicans are specifically demanding a reduction or elimination of several Democratic measures, including numerous public works projects, billions in direct aid to struggling states, and a $500 tax credit for working families, which the party argues will do little to stimulate spending.
Democrats, however, continue to support the broad outline of the bill, as the party holds a majority in the Senate and will need only two Republican votes to get a filibuster-proof majority.
• Current amendments to the Senate bill bring the stimulus total to an estimated $890 billion.
Outcome
President Barack Obama recently addressed Congress, stating that America “can’t afford politics as usual and old habits are hard to break, but now is the time to break them because we have an urgent situation.” The President also released on January 31, 2009 that Treasury Secretary, Timothy Geithner, is expected to reveal a new strategy to stimulate credit flow and bring the financial sector back to stability. Obama indicated it will “take a number of months before we stop falling and then a little bit longer to get back on track.”
Despite, pressure from the executive, reconciling the different versions of the bill will likely involve weeks of continued negotiations. However, the national urgency for the measure will likely supercede Congress’ traditionally lengthy debate process. We believe a final package will become law within the next two weeks. Furthermore, it is likely that Senate Democrats will support Republican amendments for additional investments into housing and infrastructure; however, social spending projects incorporated in the package are unlikely to be reduced significantly.
