Democrats see boost for $50 billion econ stimulus

WASHINGTON (Reuters) - The urgent need for the U.S. Congress to approve a Bush administration plan to rescue Wall Street has given Democrats renewed hope of enacting another economic stimulus package for Main Street, congressional aides said on Friday.

For months, House of Representatives Speaker Nancy Pelosi and other leading Democrats in Congress have been pushing $50 billion in emergency spending they say would spur the flagging U.S. economy.

Now, with Congress leaving town soon so that members can campaign for re-election on November 4, the likely passage of a Wall Street bailout requiring hundreds of billions of dollars could make it easier for Democrats to make their case that a fraction of that amount be spent to help the poor and middle-class.

"I can see it being one of the items up for discussion when Pelosi sits down with (Treasury Secretary Henry) Paulson. 'You want a trillion dollars for Wall Street? We need this for Main Street,'" said one House Democratic aide.

But Democrats will not hold the Wall Street bailout hostage to the economic stimulus bill, which President George W. Bush so far has opposed, said a senior House Democratic aide. Lawmakers have pledged to work together to swiftly pass the bailout package.

"It's not one (bill) over the other," the aide said.

Indeed, just before congressional leaders held an emergency meeting late Thursday with Paulson and Federal Reserve Chairman Ben Bernanke, many lawmakers had come to the conclusion that the piecemeal bailout of companies was not working and a more comprehensive approach was needed.

HELPING MAIN STREET TOO

Prior to the meeting, Pelosi made public a letter she sent to Bush calling for legislation to help Wall Street but adding, "The worsening economy demands another bipartisan economic recovery effort."

Last January, the Democratic-led Congress and Bush showed rare bipartisanship when they enacted a $168 billion economic stimulus program that relied mostly on tax rebates to spark consumer spending to prevent the economy from stalling.

While that measure has been credited with contributing to second-quarter economic growth of 3.3 percent, there are still nagging problems: The jobless rate has risen this year to a five-year high of 6.1 percent, home foreclosures continue at a swift pace and rising energy and food prices have hurt consumers.

That has prompted Democrats to push for a $50 billion follow-up stimulus program that would fund road, bridge and other construction projects, help low-income families pay upcoming winter heating bills, give more food stamps to the poor and help states pay the higher costs of health care for the poor.

"Democrats believed we needed to help Main Street before the latest administration bailout of Wall Street, and Democrats still believe we need to provide relief to Main Street," said Jim Manley, a spokesman for Senate Majority Leader Harry Reid.

Despite Bush's opposition, some Republicans were open to a second stimulus plan even before the administration said on Friday it is crafting an essential Wall Street rescue proposal. This follows Washington's bailout of mortgage giants Fannie Mae and Freddie Mac and insurance giant American International Group.

Rep. Steven La Tourette, an Ohio Republican, told Reuters this week that "moderates from Northeast districts are inclined to be receptive" to the Democratic plan.

But many conservative Republicans question whether the money actually would stimulate the economy.

The Democrats' ideas are "not the sort of things I think we need to do to get quick dollars into the economy and not balloon the deficit," said Sen. Sam Brownback, a Kansas Republican.

Instead, Brownback pitched a corporate tax break to stimulate the economy, suggesting a tax holiday for multinational U.S. firms to bring foreign earnings back to the United States that could help stimulate job growth.

(Editing by Philip Barbara)