February 9, 2009 / 12:05 AM / 10 years ago

Recovery package clears key Senate hurdle

WASHINGTON (Reuters) - President Barack Obama’s drive for emergency tax cuts and government spending to jolt the U.S. economy out of recession advanced on Monday when the Senate voted to end debate on an $827 billion bill, setting up a vote on passage on Tuesday.

President Obama departs via the Marine One helicopter for a town hall meeting to push his economic stimulus package in Elkhart, Indiana, from the White House, February 9, 2009. REUTERS/Jonathan Ernst

After a week of contentious debate, senators reached an agreement to pare down the stimulus bill by $110 billion and voted 61-36 that it was time to hold a final ballot on the package by midday (1700 GMT) Tuesday.

If the measure passes as expected, the Senate and House of Representatives will enter final negotiations on a compromise bill, with Obama arbitrating disputes.

Republicans argue some spending contained in the bill would not boost the ailing U.S. economy, mired in its worst recession in 70 years.

The legislation advanced in the Senate as Obama began a week of traveling around the country trying to build public support for the measure and he called for some schools funding be restored.

“Endless delay or paralysis in Washington in the face of this crisis will bring only deepening disaster,” Obama said in Elkhart, Indiana, where the White House said the unemployment rate had hit a debilitating 15.3 percent.

Obama, who took office on January 20, wants the stimulus legislation on his desk for signing into law by this weekend in the hope it will create and save up to 4 million jobs.

Senate Majority Leader Harry Reid warned his fellow senators: “We have to complete this work this week.”

Financial markets are closely watching progress on the economic stimulus bill as well as the Obama administration’s proposed unveiling on Tuesday of a bank rescue plan aimed at addressing a crippling credit crunch.

There are big political risks for both parties in the struggle over the stimulus, which at about $820 billion would be about 5.7 percent of gross domestic product and more than quarter of the size of the U.S. federal budget.

Congressional elections are less than two years away and without some improvement in the economy, Democrats in control of the White House and Congress could be punished by voters in 2010.

Republicans have argued that the best way to boost the economy is mainly through tax cuts, instead of jacking up government spending. But with a new Gallup survey finding that 67 percent of the public approves of the way Obama has sought stimulate the economy, their opposition carried its own risks.

Nonetheless, Senate Minority Leader Mitch McConnell said, “I think that this is a poorly crafted bill.”

He added, “I think you could get the job done for about half of that, which would still be a very robust stimulus package by any historical standard.”

The Senate bill is about $110 billion slimmer than the plan originally presented and is close in size to the $819 billion bill the House passed without a single Republican vote.

The Senate measure includes $139 billion in individual income tax breaks, $43 billion for more unemployment benefits and almost $47 billion to encourage Americans to buy new cars and homes. It also includes tens of billions of dollars to rebuild roads and help states plug growing budget gaps.

The spending cut from the original Senate bill has drawn some criticism from Obama because it deleted $16 billion to rebuild schools. He said Congress should restore some of that money.

The Senate compromise also cut $40 billion from the $79 billion to help states and $5.8 billion for preventative health initiatives.

House-Senate differences over spending and tax provisions will have to be worked out in coming days.

Additional reporting by Thomas Ferraro and Deborah Charles; editing by Chris Wilson

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