Stimulus package is scaled back

Congressional Democrats on Friday abandoned plans to offer a wide-ranging economic stimulus plan next week, putting off any chance that the federal government would provide a major jolt to the economy until President-elect Barack Obama is sworn in Jan. 20.

Democrats have scaled back their proposal to a plan that includes a $6-billion expansion of unemployment benefits and $25 billion in cash for the auto industry, setting up a confrontation with Senate Republicans over whether the government should expand its rescue program beyond the financial sector.

Senate Majority Leader Harry Reid (D-Nev.) plans to offer that package Monday, the first day of what is scheduled to be a weeklong lame-duck session of Congress. A key vote could come Wednesday and, if that fails, Democrats may have to settle for the 13-week extension of unemployment benefits as the only economic measure approved before January.

In a letter to GOP leaders, Reid blamed Republicans and the White House for opposition to the larger plan, which was to include the unemployment benefits, auto industry help, aid to states and a large increase in infrastructure spending. The package would have cost $61 billion to $150 billion.

“I understand that you currently oppose such a package and that Senate Republicans are prepared and able to block such legislation. This is disappointing and I hope you will reconsider,” Reid wrote to Senate Minority Leader Mitch McConnell (R-Ky.).

McConnell accused Reid of publicly airing a private conversation and noted that Democrats had not indicated how they intended to offer help to the auto industry.

“So it would be a real challenge to promise any level of support or opposition sight unseen,” McConnell said in a statement. “We don’t yet know if there is even sufficient support from within his own ranks.”

Democrats said they expected to craft a larger stimulus package in January and, aides said, hope to pass it in the earliest days of the Obama administration, when they will have much larger majorities at both ends of the Capitol.

As of Friday evening, Reid was considering methods of offering the money to the auto industry. In the House, Rep. Barney Frank (D-Mass.), chairman of the Financial Services Committee, is drafting legislation that would carve out $25 billion from the $700-billion financial rescue plan Congress approved. The money would come as “bridge loans” for day-to-day operations, which could help General Motors with the cash crisis that is driving it toward bankruptcy.

But the White House has balked at including the auto industry in the rescue program, officially known as the Troubled Asset Relief Program. Late Friday, White House officials instead endorsed reworking a separate federal loan guarantee program for the auto industry, which was signed into law in September and was intended to help automakers retool their plants to build more fuel-efficient cars.

If Congress loosened the requirement that the industry convert to fuel-efficient cars, automakers could more quickly access money for other operations, the White House said.

Democrats strongly oppose that proposal, arguing that part of the long-term inefficiency of the auto industry was its reliance on gas-guzzlers that no longer sell.

If there is no bipartisan agreement by Monday, Reid is expected to set up a key test vote for Wednesday. He would need 60 votes to head off a GOP filibuster. With Obama resigning his Senate seat Sunday, Reid probably would need all 50 members of the Democratic caucus and at least 10 Republicans to pass the legislation.

Capitol Hill aides hope that, should that legislation fail, a stand-alone version of the unemployment benefits could pass. The House already has approved that measure, and there is little opposition to it among Senate Republicans.