Senate Democrats see changes in stimulus plan

By Jeremy Pelofsky and Caren Bohan

WASHINGTON (Reuters) - Senate Democrats said on Sunday President-elect Barack Obama's proposals to stimulate the economy would likely undergo big changes to address their concerns and ensure they will revive economic growth.

Obama's outline for an $800 billion stimulus plan called for 40 percent of it to be in the form of tax cuts, an effort to win over Republicans who have expressed concerns about major spending on infrastructure projects also in the package.

But Democrats complained that the $10 billion in energy tax breaks were not enough and also questioned whether a $1,000 tax cut for middle class workers and a $3,000 tax break for each new worker businesses hire would actually boost the economy.

The energy tax breaks will likely increase, possibly to as much as $25 billion, and changes may be in store for the other two tax breaks that were a source of Democratic concern, lawmakers said after meeting with Obama's economic advisers.

"There are significant changes already being put in place and being contemplated," Sen. John Kerry, a Massachusetts Democrat, told reporters. "I think it's moving in the right direction and I think we're making a lot of progress."

He said he believed the middle-class tax cut and job hiring credit would change.

It was the second meeting in four days between the Senate Democrats and Obama's incoming director of the National Economic Council Larry Summers and other advisers to hash out details of the economic stimulus plan.

Democrats went out of their way to praise the latest round of talks with Obama aides after initial criticism surfaced about the economic plan and prompted questions about whether the new president would have trouble getting his agenda through the Congress, which is controlled by members of his own party.

'VERY ENCOURAGED'

"It's very clear they've listened and they've heard and they're moving to respond," said Sen. Kent Conrad, chairman of the Senate Budget Committee and a North Dakota Democrat. "I'm just very encouraged by the discussion."

"I think you'll see some things being added to especially in the energy area and I think you'll see other modifications that show that they're paying attention to getting the best bang for the buck," he said.

Obama takes over from President George W. Bush on January 20 amid a deepening recession. Government figures last week showed the unemployment rate surged in December to 7.2 percent, after a year in which employers slashed 2.6 million jobs from their payrolls, the most since 1945.

Obama earlier on Sunday said in an interview he would not try to dictate to lawmakers the details of a stimulus package but would work closely with them to hammer out a plan.

"We're going to have a collaborative, consultative process with Congress over the next few days," Obama said on ABC's "This Week with George Stephanopoulos." "We're not trying to jam anything down people's throats," he said.

Obama wants passage of a stimulus plan by mid-February, saying it is crucial to jump-starting the economy.