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A TIME OF TRANSITION

Obama sweetens stimulus for GOP

Big tax cuts would go to businesses. Still, fast passage with broad support will be tough.

January 06, 2009|Jim Puzzanghera and Christi Parsons

WASHINGTON — Despite Barack Obama's decision to include as much as $100 billion in business tax breaks to his economic stimulus package to woo reluctant Republicans, obstacles to speedy, bipartisan passage remain.

The president-elect began working Monday in pursuit of twin goals -- reviving the economy and transforming the political climate in Washington -- by including GOP leaders in his first round of Capitol Hill meetings since the election. He pitched the need to act fast and with a broad consensus.

Obama is proposing to devote about $300 billion to tax cuts in a stimulus package that may total as much as $775 billion. About half of those cuts would be tax credits of up to $500 for workers earning less than $200,000 a year, although details of the plan are being worked out. The package also contains about $100 billion in business tax cuts that many conservatives have been advocating.

"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 that Obama held with Democratic and Republican congressional leaders Monday.

"I think he's already been listening to the suggestions we've made," McConnell said.

At the same time, McConnell and House Minority Leader John A. Boehner (R-Ohio) said they were not ready to endorse the overall stimulus proposal. And other high-level Republicans voiced concern that, as appealing as tax cuts were, the overall plan raised concerns in terms of its impact on the federal deficit.

House Minority Whip Eric Cantor (R-Va.), speaking after the closed-door meeting with Obama, said, "I think there would be a lot of support" for tax cuts among the GOP rank and file. But, he added, "we cannot afford to be burdening our children and our grandchildren with an extra trillion dollars in debt."

Even before Obama returned to Washington on Sunday from his holiday break in Hawaii, Republicans were saying his stimulus program should be subjected to the normal system of hearings and full debate, rather than rushed through to meet the economic emergency -- especially at the cost of raising the deficit.

On Monday, the president-elect said he was looking for a balanced stimulus plan that addressed the needs of businesses as well as consumers and that he hoped Congress would pass 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-San Francisco). "They are dictated by the sense of urgency that the American people have about their economic well-being." Pelosi would not commit to a specific timetable, however.

Obama is set to provide more details of his stimulus plan in a speech later this week. The majority of the package 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 healthcare, who are struggling to make ends meet," Obama told reporters after a meeting with his economic team Monday.

The largest component of the cuts 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 an Obama transition official who declined to be named because he was not authorized to discuss the stimulus plan publicly. Those earning more than $200,000 would not qualify. If Congress passes the stimulus package quickly, people will see the change in their paychecks by midyear.

"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," the official said.

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