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Economic Stimulus Plan Dies in Senate

As policy makers consider the best response to the recession, growing unemployment and surging uninsured population, the Senate and House have squared off over tax cuts and health insurance policy, each blaming the other for the lack of an economic stimulus package.

The Republican-controlled House of Representatives passed President Bush’s stimulus plan in a vote of 224-193 after debating the details until after midnight Wednesday. Nine Democrats joined all the Republicans in voting for the proposal.

However the Democratic Senate rejected the proposal saying it offered too many corporate tax breaks and not enough health insurance benefits to people who lose their jobs.

“I hope the American public understands the charade,” said Senate Majority Whip Harry Reid of Nevada. “They [Republicans] knew, they know, that it had no chance of passage over here.”

Currently, the bill lacks the 60 votes needed to be brought up for passage, even though a slim majority of the Senate may actually back it.

When asked whether the economic stimulus package was dead, Democratic majority leader Tom Daschle (D-SD) said “yeah.”

The president said he was disappointed that the Senate would not give him a stimulus package to sign into law.

“Unfortunately that particular piece of legislation was declared dead before it even got to the Senate floor,” Bush said at a visit to a nearby charity.

“For the good of the American people, that bill ought to get out of the United States Senate and get to my desk,” the president added.

House Speaker Dennis Hastert (R-Ill.) suggested Mr. Bush call on Congress to cut short its winter break, set to begin at the end of this week, and return to work on Jan. 2 to try again to forge a passable economic stimulus plan.

“We had the Senate today stick up their nose and turn their back on it,” Hastert said. “I think that’s unfortunate.”

Not enough compromise?

This is the second economic stimulus bill passed by the House.

In October, the House passed legislation that included a decrease in the capital gains tax rate, and gave billions of dollars in refunds for corporations as part of a provision repealing the corporate alternative minimum tax. The cost was an estimated $160 billion over 10 years. 

The Democrats countered with a $125 billion alternative stimulus package that included money for school construction, unemployment compensation, economic development, security and health benefits. 

The current House proposal would cost the federal treasury an estimated $90 billion next year and $214 billion over five years. 

During the negotiations, the two sides were able to agree on some elements of a stimulus package. Both the current House bill and the Senate’s plan give low-income workers a $300 per person check. Both grant tax breaks to businesses as an incentive to invest in new equipment. 

There were even signals that the Senate Democrats might go along with the Republican plan to lower the current 27 percent income tax rate to 25 or 26 percent. Republicans had modifed their package to include a substantial amount of money for unemployment benefits. 

But the talks fell apart when the two sides failed to agree on how to provide health insurance benefits to people who lose their jobs. 

Experts say the standoff reflects a genuine philosophical divide between the Republicans and the Democrats. For the most part, Republicans want to use tax credits to help individuals buy insurance in the open marketplace. 

Democrats want to strengthen the employer-based system with federal assistance, a direct 75 percent premium subsidy, to help laid-off workers maintain the coverage that they had when they were working.

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