Administration Reaffirms Support for Stimulus Package

Concerned that a House Republican-backed stimulus package may offer more perks than are necessary to get the economy moving again, Treasury Secretary Paul O'Neill met with Senate Republican lawmakers late Tuesday to rein in some of the plan's details.

"It's not going to be a Christmas tree," warned Charles Grassley, R-Iowa.

The administration denies that it is concerned the economic stimulus package passed by a House committee last week is too large. The president's proposal called for $60-75 billion in stimulus provisions.

O'Neill said size is not the issue; he just wants to make sure that some of the bill's measures — inspired following terror attacks on the Pentagon and World Trade Center — are not merely gratuitous.

O'Neill said he was "very heartened" by the way senators approached Tuesday's discussion and without saying what they had agreed upon, added he was confident "they want to act in a way consistent with the president."

The House package passed the Ways and Means Committee Friday and is expected to go to the House floor for a vote Thursday. 

The Republican-backed version offers $100 billion stimulus that includes tax rebates for low-income earners, relief for unemployed workers and considerable tax breaks for businesses.

The plan would enhance business tax write-offs for purchasing equipment, repeal the corporate alternative minimum tax and allow companies to deduct current operating losses against taxes paid five years earlier. It would effectively cut capital gains tax rates to 18 percent for many taxpayers and raise capital loss limits over the next two years.

Another provision in the bill would cut the current 27 percent income tax rate to 25 percent in 2002, four years earlier than under the just-enacted 10-year, $1.35 trillion tax cut. 

Democrats on the committee preferred a $110 billion package that provided more benefits to individuals and less tax breaks for businesses. 

Ways and Means member Rep. Ben Cardin, D-Md., said the bill "provides most of the tax relief for businesses and almost no relief for displaced workers. It doesn't have a component for people who have lost their jobs and gives a significant amount of tax relief for corporations."

Cardin said Democrats will likely propose a substitute bill on the House floor this week.

But concern over the size of the package applies to both Republican and Democratic provisions included in the bill, said Sen. Rick Santorum, R-Pa.

Following the Senate GOP meeting with O'Neill, Santorum said the treasury secretary was very clear that Congress must "discipline ourselves in a bipartisan way."

"Putting things in a package that doesn't stimulate is a luxury we can't afford," Santorum said.

Reports of administration alarm about the bill's pricetag arose Monday when O'Neill described the bill as partly "show business."

"It's an opportunity for people to say, 'I voted for the things that you want' with the expectations that we will come out with a package that doesn't do violence to the long-term financial stability of the country," O'Neill said during a visit to Memphis, Tenn.

"The president wants to make sure the package has a short-term effect on the economy to give it a boost, so the fiscal impact will be measured short term and not  have any longer and larger long-term implications," White House spokesman Ari Fleischer offered Tuesday. "The package includes more than the president asked for, but that's not unusual in the Congress and the president is confident, in the end, this will all work out."

Fleischer said Bush wants Democrats and Republicans to vote for the plan when it reaches the House floor Thursday. 

But Rep. Bill Thomas, R-Calif., who wrote the bill, still bristled Tuesday at talk that his bill was too big. The difference is not in policy but in cost projections based on different sets of economists, Thomas said. The White House uses the Office of Management and Budget. The Congress is required to get its numbers from the Joint Committee on Taxation.

Thomas also said that the president forecast a $60-$75 billion tax plan, but did not address unemployment insurance, health care or "providing low income with the ability to spend money." 

"If you add all three of those up, I think you'll come at about the same position that we're in.  Somebody needs to ask the White House exactly what they mean by their total package," Thomas said.

A Treasury official said that the bill would probably go through quite a bit of renegotiation between the House and Senate before it is laid on the table for the president's signature.

The president also recognizes there will have to be compromise on a final plan.

"The president is confident that, in the end, this will become a bipartisan product," Fleischer said. "He calls on Democrats to be open-minded about this as well."

The Associated Press contributed to this report.