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Lawmakers Wrangle Over Costs of Stimulus Package

February 5, 2009 at 6:00 PM EDT
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Senate Democrats pushed for more votes on an economic stimulus bill Thursday amid efforts to trim the plan's costs. Office of Management and Budget Director Peter Orszag and Sen. Arlen Specter, R-Pa., offer their views.

JIM LEHRER: Senate Democrats pushed hard today for more votes on an economic stimulus bill. Prospects for passage improved, with efforts to cut more than $100 billion from the proposal.

NewsHour congressional correspondent Kwame Holman has our lead story report.

KWAME HOLMAN: The name of the game under the Capitol Dome all day was “how to get to 60 votes.” That’s what it will take to get past any procedural hurdles and pass the bill.

By midday, Senate Majority Leader Harry Reid sounded a note of confidence. In an off-camera briefing, he said, “Do we have the votes? We believe we do. We believe we can find two Republicans of goodwill and hold all 58 Democrats.”

While Reid touted the bill’s chances, a bipartisan group of more than a dozen senators met behind closed doors. They hoped to pare the price tag from $920 billion to something closer to $800 billion.

The effort was led by Democrat Ben Nelson of Nebraska and Republican Susan Collins of Maine. They met with President Obama at the White House yesterday.

SEN. SUSAN COLLINS, R-Maine: The president made a very strong case yesterday to me for a package of sufficient size to jolt the economy. We don’t want a package that is too small because that will end up just wasting money. On the other hand, we’re very leery of having an enormous package that would not be necessary and would just boost the federal deficit.

SEN. BEN NELSON, D-Neb.: Whatever you have in there, you want it to be as robust and stimulus as you can — you can have it, so that it’s not just a spending bill. And a lot of items that are solid public policy items that can be in other locations because they’re not as stimulative, although very good, can be put in other — we’re scrubbing that out and keeping in that that we think is the stimulative.

KWAME HOLMAN: But a number of Republicans called for a sweeping rewrite of the entire bill. On the Senate floor, South Carolina’s Lindsey Graham took note of the bipartisan group’s efforts.

SEN. LINDSEY GRAHAM, R-S.C.: If you believe this is a good process to spend $800 billion, we’re on different planets. We’re literally making this up as we go, Senator. If this is such a good process, why are 16 senators meeting in a corner trying to figure out how to keep this thing from stinking up with the public?

KWAME HOLMAN: Arizona Republican John McCain and others moved to put that sentiment into action. McCain’s alternative cost $421 billion, nearly two-thirds in the form of tax cuts.

SEN. JOHN MCCAIN, R-Ariz.: We have strayed badly from original intent of creating a situation in America to reverse the terrible decline and economic ditch we find the American economy in, to the point where we have had policy — spending programs and policy provisions which have nothing to do with stimulating the economy and creating jobs.

KWAME HOLMAN: But Democrats rejected any attempts to scale back the bill that drastically. Their number-two in the Senate, Dick Durbin, accused Republicans of splitting hairs over the spending provisions.

SEN. DICK DURBIN, D-Ill.: I’ve listened carefully and measured and added up their arguments against these measures. And it turns out that, if I could do this in a symbolic way, that their measures account for one page, one page of this bill. You listen to the things that they list, that they find so objectionable, they account, in dollar terms, to about one page of this bill.

KWAME HOLMAN: Other provisions were approved that added to the bill’s cost and could garner more votes for the final product.

Two such changes to the bill were adopted last night. One, by Georgia Republican Johnny Isakson, grants a $15,000 tax credit to homebuyers at a cost of $19 billion. The other loosened the “buy American” mandate that stimulus projects use domestic iron and steel. President Obama had expressed concern that the original language could spark a trade war.

Mr. Obama pressed again today for Congress to move swiftly, first, on the op-ed page of this morning’s Washington Post. He returned to his theme later during a visit to the Energy Department.

U.S. PRESIDENT BARACK OBAMA: Now, I believe that legislation of such magnitude as has been proposed deserves the scrutiny that it has received over the last month. I think that’s a good thing. That’s the way democracy is supposed to work.

The time for talk is over. The time for action is now, because we know that, if we do not act, a bad situation will become dramatically worse. Crisis could turn into catastrophe for families and businesses across the country.

KWAME HOLMAN: The president will try to keep the pressure on Congress at a prime-time news conference on Monday night. He wants the final bill on his desk by mid-month.

JIM LEHRER: And we have back-to-back interviews with major players in the stimulus discussions. Jeffrey Brown talks first to a top administration official.

Debate over the measure

Peter Orszag
Office of Management and Budget
I think there's a healthy debate. It's part of the legislative process. Again, what I want to stay focused on is that, broadly speaking, the package is about the right size and I think it has the right balance.

JEFFREY BROWN: From the White House, I'm joined by Budget Director Peter Orszag. He's been negotiating with senators today and throughout the week.

Mr. Orszag, as we speak, how close are we to some kind of compromise that can pass the Senate?

PETER ORSZAG, White House budget director: Well, I hope we're close. And the reason I hope we're close is, again, we need to make sure we get this economy back on track.

The gap between how much the economy is producing and how much it could produce amounts to $2 trillion over the next two years. That hole needs to start to be filled in.

JEFFREY BROWN: The efforts underway by some senators in both parties to strip out $100 billion to $200 billion, is that something the president can sign on to?

PETER ORSZAG: Well, we think the package is about the right size. Obviously, the legislative process will work its way. I want to again emphasize the reason that we think it's about the right size is it will help create 3 million to 4 million jobs -- create or save 3 million to 4 million jobs and get this economy back on track.

Unemployment insurance claims this morning were the highest since 1982. The economy lost 2.5 million jobs last year. We're facing the worst crisis since the Great Depression. The time to act is now.

JEFFREY BROWN: But you're also facing a lot of criticism, and that criticism seems to be growing. So there is this move to strip out some things, to get it perhaps down to about $800 billion, you don't see the bill moving in that direction at this point?

PETER ORSZAG: Well, I think there's a healthy debate. It's part of the legislative process. Again, what I want to stay focused on is that, broadly speaking, the package is about the right size and I think it has the right balance between investments in infrastructure that will help promote future economic growth, tax provisions, assistance like unemployment insurance and food stamps and other provisions that spend out fast and help to bolster the economy immediately. The portfolio as a whole is well balanced.

JEFFREY BROWN: Well, in his op-ed today, the president referred to what he called misguided criticisms of the plan that, quote, "echo the failed theories that helped lead us into this crisis." Was the president -- were you taken by surprise by the level of criticism that's hit?

PETER ORSZAG: No, I think this is part of the natural process of crafting a package, and I think it's healthy. I think it's healthy they everyone is participating and putting forward ideas.

The package already includes provisions that have been put forward by prominent Republican senators. There's bonus depreciation for businesses to allow them to deduct the expenses of making investments faster. The alternative minimum tax was added to the package at the suggestion of Senator Grassley.

So I think this is part of the normal and healthy process through which legislation occurs.

JEFFREY BROWN: But some analysts today have been citing this op-ed and some recent talk by the president as signaling a more combative effort, that is moving away from this bipartisan effort that he started with, which didn't seem to be working, and now some tougher talk. Is that right?

PETER ORSZAG: Well, again, I think the important thing is to get the package enacted. And I think it's healthy that these discussions are occurring. There are obviously Republicans and Democrats in discussions over the legislation. And that's, frankly, the way it should be.

JEFFREY BROWN: One of the big questions here all along -- and we've discussed it on the program -- is the mix of long-term, big goals and short-term fixes. And there's been a big argument, I think, that's played into some of the debate that's hit you.

Is it possible -- I mean, the theory was that it was possible to do both, to tackle some big issues like energy and health care while stimulating the economy quickly. Do you think, in retrospect, it's been something of a mistake to try to take on too much?

PETER ORSZAG: I don't think so, because I want to come back to that point I started with, which is the gap between how much the economy is producing and how much it could produce. It's $2 trillion, $1 trillion a year over the next two years. That's $12,000 in lost income -- just evaporated -- that's not there for a family of four on average.

Filling in that gap requires moving beyond just the very narrow package of things that immediately spend out 100 percent over the next three or four months and that have high bang for the buck.

If you restricted the package just to those provisions, you're leaving way too much macroeconomic risk on the table. And as you expand the package beyond that narrow set of provisions, why not, in addition to getting the economy back on its feet, provide firm ground for future economic performance? It's almost common sense, I think.

Timeline for spending

Peter Orszag
Office of Management and Budget
The Congressional Budget Office has analysis of the Senate package, suggested that more than three-quarters of the money will spend out over the next 18 months. Some people think that's too high; some think that's too low. It seems pretty good to me.

JEFFREY BROWN: So you mean you're saying that it's OK that a lot of this money will not be spent in the first, say, 18 months, because that's been a criticism even from some on the Democratic side?

PETER ORSZAG: Well, again, I think that this is why we're looking for a balance. The Congressional Budget Office has analysis of the Senate package, suggested that more than three-quarters of the money will spend out over the next 18 months. Some people think that's too high; some think that's too low. It seems pretty good to me.

You don't want -- you don't want 100 percent, because that would create an air pocket at the end of 2010, which would also be a problem. So, again, I think what we're seeking here is a balance, and that's what the package reflects.

JEFFREY BROWN: And speaking of balance, another part of the criticism from opponents on the Republican side is the proper balance of taxes versus spending. As you know, there's been a lot of criticism of the tax plans that the president's put forward and suggestions that more of this money, more of this plan should go towards different and bigger tax cuts. What's the response?

PETER ORSZAG: Well, again, let's look at what the evidence suggests. Respectable economists, whether Republican or Democrat, will tell you that money that you get out the door for an infrastructure project or for direct spending has a higher bang for the buck in terms of creating jobs and jump-starting the economy than tax provisions do, because part of the tax provisions are saved rather than adding to aggregate demand. On the other hand, tax provisions can get out the door really quickly.

So, again, I think it's a balance between the high-bang-for-the-buck stuff, which may spend out slightly slower, and tax provisions, which can get out the door fast, but have lower bang for the buck. And that's what this package reflects.

JEFFREY BROWN: But you're involved in negotiations ongoing. Are some of those things, the tax provisions, are they on the table, as well?

PETER ORSZAG: Well, actually, I read that I was in negotiations today. I've been hard at work here all day. So the negotiations are occurring between senators -- or among senators, I should say, and that's the way it should be at this point. The legislative process is working its will.

JEFFREY BROWN: Well, but from the perspective of where you sit, you're well involved. And is the administration willing to give on some of the tax provisions? Are those kinds of things on the table, from your perspective?

PETER ORSZAG: I don't think it's -- I don't think I should be negotiating at this point on national television. I think the important point, again, is the package as a whole reflects a balance of fast-spending things that will help jump-start the economy, make key investments in health care, and in education, and as a whole helps to get the economy back on track.

We have to remember the context here -- and I think it's easy to forget that -- that we are facing this very severe economic crisis that we're inheriting and that needs to be addressed and that will take some time to work our way out of.

JEFFREY BROWN: All right, one other controversial area I want to talk to you about. That's the "buy American" provision that upset many other nations.

The president expressed some concerns with it the other day. The language was toned down in the Senate, but I want to try to be clear about this. Is the president saying that he could live with the provision in some form? Or does it need to be taken out all together?

PETER ORSZAG: I think what the president has said is that we want to be consistent with our World Trade Organization obligations. And we're going to make sure that we are, which, I think, is the key criteria to be applied here.

JEFFREY BROWN: As a practical matter, though, what does that mean, in terms of using only American material?

PETER ORSZAG: Well, again, as a practical matter, it means that any provisions will be fully consistent with international trade law and international trading practices. And I think I should probably leave it at that.

JEFFREY BROWN: All right, one more thing. I know from talking to you in the past that you are a student of the federal budget, that you have worried much about the budget deficit in the past. Here you are at work on a plan that is going to leave this country with a very large deficit.

Do you have qualms about that? Or is this a question of there's no alternative at the moment?

PETER ORSZAG: I think, unfortunately, there's no alternative. We are inheriting a large deficit even if we don't act. We're also inheriting this severe economic crisis. We need to act.

And then, as we emerge from the downturn, we need to get our medium-term and long-term deficits under control. We're going to have a lot more to say about that in a few weeks when the president unveils the budget that will be out before the end of February.


PETER ORSZAG: And that will deal with the next 5 or 10 years.

JEFFREY BROWN: All right. White House Budget Director Peter Orszag, thank you very much.

PETER ORSZAG: Thanks for having me.

JIM LEHRER: And to a Republican senator involved in trying to make a deal, Ray Suarez has that interview.

Trimming the package

Sen. Arlen Specter
We passed the TARP bill, $700 billion, without having a chance to study it. It was a rushed matter, and we made a lot of mistakes. There were provisions there that no one really understood.

RAY SUAREZ: Sen. Arlen Specter of Pennsylvania is part of a bipartisan group looking to make some significant cuts in the size of the stimulus package. He met with the president yesterday and has been meeting with Senators Collins and Nelson, as well. He joins us tonight from Capitol Hill.

Senator Specter, welcome. Have some of the things that you and your bipartisan group have been suggesting going to make it into the final package?

SEN. ARLEN SPECTER, R-Pa.: Well, it depends upon whether we can go far enough to satisfy a small group of Republicans. I would like to see this a bipartisan bill. I think it was very -- it could have been much better for the country had there not been a straight party-line vote in the House.

And we're working. We've been meeting virtually around the clock, several meetings today, and it's still going on to try to refine it to be satisfactory. And if we can come to terms, I think it will be part of the final legislation.

RAY SUAREZ: Today the president said the time for action is now, but some of your Republican colleagues took to the floor today to plead for a slowing down, a review, a rewrite of the bill. Where do you find yourself tonight?

SEN. ARLEN SPECTER: Well, I discussed that with the president and raised the issue that we're not following regular order. And when we don't go through the hearing process, the analysis, the markup, we make mistakes.

We passed the TARP bill, $700 billion, without having a chance to study it. It was a rushed matter, and we made a lot of mistakes. There were provisions there that no one really understood.

Now, we're dealing here with $800 billion-plus. And I think that we could take a little more time. The president says we have a very severe emergency. I recognize that. This is not my preference, but we're trying to be cooperative.

Listen, we want President Obama to succeed, and we want to deal with this economic crisis, and we're aware of the high unemployment rate and the thousands of people who are losing their jobs every day. But we have a responsibility under the Constitution for separation of powers to take an independent look. And we're doing our very best to do that.

RAY SUAREZ: We just heard from the director of the Office of Management and Budget, Mr. Orszag, who told my colleague, Jeff Brown, that they've been wrestling all along with the balance between tax cuts that get into people's hands right away, but sometimes aren't very stimulative, versus spending that rolls out over a longer period of time, but you get a good bang for the buck.

Are you close? In the package that's being presented by the bipartisan group, are you close to striking a balance that you can support?

SEN. ARLEN SPECTER: Well, I think we'd be better off with more tax cuts. They are more immediate. And there are many items in this stimulus package which do not go to stimulate the economy.

I think -- and I've been on the Appropriations Committee for all of my 28 years -- a lot of these items ought to be taken up in regular order in Appropriations. And we ought to be directing the stimulus package to things that will stimulate the economy now.

When we are burdening the taxpayers with this tremendous additional burden, we ought to be very, very sharply focused. We ought to have a lot more in that on highways and bridges and mass transit, high-speed rail. We ought to be looking to energy items.

But there's a great deal of this bill on items I have long supported, but that ought to be in the regular appropriations process.

Emphasizing programs, safety net

Sen. Arlen Specter
We're trying to emphasize highways, bridges, mass transit, and some of the other programs, and also the safety net. Some of the other programs could be deferred until the appropriations bill comes up.

RAY SUAREZ: Well, just so I understand you, the current price tag of the package that's being offered by the majority is something in the range of $920 billion. Senator Collins, your colleague from Maine, talked about a package that she'd accept that was more like $800 billion.

If you were going to strip out that kind of money, would it come out of the spending for capital projects and investments in various kinds of local spending? Or would it come out of the tax cuts to get that price tag down?

SEN. ARLEN SPECTER: The focus of what we've been doing in these bipartisan talks has been on the appropriations process. It has been on the line where monies are being spent. We're trying to emphasize highways, bridges, mass transit, and some of the other programs, and also the safety net. Some of the other programs could be deferred until the appropriations bill comes up, which is going to be very, very shortly.

RAY SUAREZ: Has the president been too optimistic in your view on the number of jobs that could be created by a package?

SEN. ARLEN SPECTER: No, I don't believe he's been too optimistic. I'm prepared to accept his figures. I think the reality is that nobody knows with any relative degree of certainty.

We pick a figure, and it doesn't have any scientific basis. I wouldn't say that it's picked out of the air, but that's -- that's pretty close. And when you start to estimate the number of jobs, it reminds me of Police Commissioner Rizzo in Philadelphia years ago estimating crowd size. It's pretty speculative.

RAY SUAREZ: As we get to this point in the process, when you talk to your fellow senators, is it just a question of a big existential objection to this kind of thing? Or are there people who are saying, "If only this wasn't in it, then I could come around"? Or, "If I could get this part of it smaller or larger, for that matter, then I could come around"?

SEN. ARLEN SPECTER: We don't have existential objections. We have very concrete specific objections.

We object to spending more than we have to for a purpose which is not really crystallized and defined. Our objections really go to recognizing the need for a stimulus and wanting these expenditures to be targeted rifle-shot to a stimulus and not look to long-term effects where we have a regular budget to do that, where we establish targets, we establish amounts of money, and we then consider priorities. That's really the core of our financial, fiscal concerns.

RAY SUAREZ: And do you think there will be a vote tonight?

SEN. ARLEN SPECTER: No, on the final passage? No. We're right in the middle of roll call votes. A dozen amendments are being considered, and there are many more to be considered.

On the efforts that Senator Collins and Senator Nelson and the rest of us are working on, we have to write it down. It's going to take a little time. It doesn't necessarily have to take a whole lot of time, and we're prepared to move ahead promptly.

But we cannot do it instantaneously. That is not physically possible, let alone whether it's the best thing to do.

RAY SUAREZ: Majority Leader Reid said in an off-camera briefing earlier today that he thinks he has the votes to get this thing passed and with a few Republicans.

SEN. ARLEN SPECTER: Well, I don't know where they are coming from. I think that he could have the votes. There could be a respectable number if we're able to work this out.

But I don't want to disagree with the majority leader. He can count.

RAY SUAREZ: So you haven't spoken to any of your colleagues that you could identify now as an "aye" vote on this?

SEN. ARLEN SPECTER: Well, I'm not going to talk about conversations I have with my colleagues. Suffice it to say that I do not see 60 votes in hand, but I see the prospect of doing that if we can have just a little more flexibility.

RAY SUAREZ: Senator Arlen Specter of Pennsylvania, thanks for joining us, sir.

SEN. ARLEN SPECTER: Always a pleasure. Thank you.