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Democrats push Obama for smaller tax cut in stimulus package

The president-elect would devote 40% of the $775 billion to give taxpayers a break, but his party is urging him to put more into roads, bridges and other projects.

January 14, 2009|Peter Nicholas

WASHINGTON — President-elect Barack Obama is coming under strong pressure from his own party to alter the basic mix of his $775-billion stimulus plan, reducing the portion devoted to tax cuts and devoting more money to direct spending for roads, bridges and other projects.

Obama has laid out a proposal that would reserve about 40% of the stimulus package for tax reductions -- a commitment partly meant to win over congressional Republicans who would ordinarily be averse to spending on so large a scale. In the first major legislative push of his presidency, Obama is eager to notch a large, bipartisan victory.

At this point, Obama is not considering scaling back his tax cut plans, a transition aide said Tuesday.

Influential Democrats are cautioning that they want less reserved for the tax reductions that Obama has embraced to help jump-start the economy. Obama's tax measures are targeted at both middle-class families and businesses.

Brendan Daly, a spokesman for House Speaker Nancy Pelosi (D-Calif.) said she would prefer that more of the package be devoted to public works.

In a television interview last week, Pelosi said she would prefer to see only about 33% of the stimulus used for tax cuts.

Obama went to the Capitol on Tuesday to meet privately with Democratic senators. He used the forum to urge senators to vote for the stimulus and to persuade them not to block access to $350 billion in federal bailout money approved last year.

"Many of us are concerned that 40% of the package that was announced was to be tax cuts," said Sen. Dianne Feinstein (D-Calif.).

She said she was confident that the tax component of the plan would be decreased.

"My understanding is that's being lowered. So that will probably work out. We'll have to wait and see."

Feinstein, in a follow-up interview, made the case for heavy investment in public works projects that would create new jobs while leaving an enduring legacy.

"The way I look at it is that we need to get as many necessary shovel-ready infrastructure projects as possible," Feinstein said. "What I would hope is at the end of two years you'd be able to say, we retrofitted X number of bridges, we've built X miles of highway, we've built X-number of classrooms."

Democrats have already succeeded in getting Obama to drop one piece of his plan.

Obama had wanted to give employers a $3,000 tax credit for each new employee. In the face of resistance from Democrats who predicted the measure would prove ineffective, he is abandoning it, the Obama transition aide said.

Even though Democrats want the overall tax cut proposal trimmed, they want individual pieces expanded.

In the initial proposal, for example, Obama set aside $10 billion in tax breaks for development of alternative energy sources, Democratic lawmakers said. One Democratic senator said that amount has now more than doubled.

Among those calling for an increase in such tax breaks is Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee. "Energy is such a big opportunity for our country," Conrad said, "to reduce this hemorrhage of American money to countries that are the oil producers."

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peter.nicholas@latimes.com

Janet Hook contributed to this report.

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