Bipartisanship shows cracks

President-elect Barack Obama’s hopes of scoring significant bipartisan support for his stimulus package are fading, as the debate over the nearly $800-billion plan morphs into a classic Washington impasse: two rival parties in irreconcilable conflict.

Obama had hoped to induce Republicans to back his plan by putting forward a series of business tax cuts. But GOP support is peeling off as the party crafts alternative ideas that rely even more heavily on tax reductions.

Obama’s stimulus package is on track to pass before the Presidents Day recess in mid-February. But it is increasingly doubtful that he will pick up the 80 Senate votes he had hoped to win in the first major legislative test of his presidency. Instead, the bill is likely to pass on the strength of the Democrats’ majority.

Sen. John Thune (R-S.D.) said Wednesday that prospects for bipartisanship in the stimulus debate rapidly were eroding.

“The air is coming out of that balloon,” Thune said. “To attract Republicans, they lose Democrats. It is a very difficult needle to thread. They are discovering that the goal [of an 80-vote majority] is unrealistic. He got so much push-back from his own people.”

House Republican leaders have set up a working group to draft their own stimulus proposal focusing on permanent, across-the-board tax relief. And the Republican Study Committee, a group of about 100 conservative House Republicans, unveiled a bill Wednesday that contains a series of tax cuts, including reducing all personal income tax rates by 5% and cutting the corporate tax rate from 35% to 25%.

The president-elect’s efforts to win over Republicans -- in keeping with a campaign promise to end Washington gridlock -- ignited a backlash within his own party. Obama has dedicated 40% of the package to tax reductions, divided evenly between business and middle-class tax cuts. But Democratic leaders are dissatisfied and want more focus on direct spending, less on tax relief.

House Speaker Nancy Pelosi (D-San Francisco) told reporters Wednesday the package needed a single focus: “Jobs, jobs, jobs, jobs.”

“It must create jobs immediately, and it must contribute to the long-term stability of our economy to continue to create jobs,” she said.

Earlier in the day, Pelosi told National Public Radio that the share of the package devoted to tax cuts would drop -- from the 40% Obama proposed to about 33%.

“And that’s probably appropriate, as long as the tax cuts are those which stimulate the economy, which give a tax cut to the middle class, not the wealthiest people in America,” Pelosi said.

Obama has shown he wants to compromise with Democratic leaders. He already has dropped one business tax break -- a $3,000 credit for each job employers create. House Democrats also have voiced skepticism about another tax break that would extend the period in which businesses can use operating losses to offset taxes paid in more profitable years.

An Obama transition aide signaled that Obama may accommodate Democrats who want to scale back the share of the package set aside for tax cuts in favor of more direct spending.

“The president-elect has expressed a general willingness to work on these issues,” the aide said Wednesday. He asked not to be identified because he was not authorized to speak publicly.

But the concessions made to Democratic lawmakers risk driving away more Republicans. That’s not the outcome Obama wants.

Sen. John Cornyn (R-Texas) said there was “not much” GOP support at this point for an $800-billion package that consisted largely of new spending.

“There’s been a lot of reassuring rhetoric out of the [Obama] administration, but we haven’t even seen a bill yet,” Cornyn said. “A lot of it’s going to depend on whether Obama can say no to Democratic leaders and some of the long line of people who want some of that money for various projects. People want to see Obama succeed -- Republicans and Democrats -- but we’re not going to violate our principles.”

The public seems to prefer the Democrats’ vision. A Wall Street Journal/NBC News poll released Wednesday showed that 43% of people surveyed over the last week supported the stimulus, with 27% saying it is a “bad idea.”

By a large margin, the poll also showed that people favored direct government spending aimed at creating jobs, as opposed to tax cuts designed for that purpose.

Still, Obama is taking no chances. On Friday he will visit a wind turbine manufacturing plant in Bedford Heights, Ohio, to make the case for his plan.

--

peter.nicholas@latimes.com

jim.puzzanghera@latimes.com

--

Janet Hook in the Washington bureau contributed to this report.