Obama, Senate Democratic leaders reach deal on stimulus

President Obama and Senate Democratic leaders, propelled by news of the biggest one-month loss of jobs in 35 years, hammered out a deal Friday evening that clears the way for Senate approval of a massive economic stimulus plan.

The compromise, the product of frenzied behind-the-scenes negotiations, would slice about $110 billion from the bill, which had grown to more than $930 billion as amended on the Senate floor.

It would bring the price tag more in line with the $819-billion bill approved by the House for the spending and tax-cut plan that is the cornerstone of Obama’s efforts to revive the economy.

The bill had stalled amid partisan differences, with most Republicans saying it carried unnecessary spending and not enough in tax cuts. But over the course of several days, a small group of senators from both parties, working with White House Chief of Staff Rahm Emanuel, negotiated the compromise, trimming the bill in hopes of winning backing from a handful of moderate Republicans.

Senate Majority Leader Harry Reid (D-Nev.) said he hoped to have a final vote as early as possible next week, but Republican delaying tactics dashed plans to have a weekend vote. Senate Democratic leaders said they believed they would have enough support to pass the legislation.

“For the first time, there’s light at the end of the tunnel,” said Sen. Charles E. Schumer (D-N.Y.), predicting that Congress would send the bill to the White House, as promised, by the end of next week.

When the compromise was announced Friday evening to a closed meeting of Senate Democrats, it was greeted with applause, and Democrats emerged saying that the party had rallied behind it.

The White House applauded as well. “On the day when we learned 3.6 million people have lost their jobs since this recession began, we are pleased the process is moving forward,” Obama spokesman Robert Gibbs said.

Friday’s release of a dire unemployment report added to the urgency of Obama’s appeal that Congress move with speed. U.S. employers eliminated 598,000 jobs in January, the report said, the biggest one-month plunge since 1974. The unemployment rate now stands at 7.6%.

“These numbers demand action,” Obama said. “It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay or politics as usual while millions of Americans are being put out of work.”

Under the deal, the cost of the bill would be lowered by scaling its tax cuts back by $25 billion. In addition, lawmakers trimmed $85 billion in spending for items that they believed did not belong in a stimulus package because they would not spur economic growth -- such as $870 million to combat the pandemic flu.

“We trimmed the fat, fried the bacon and milked the sacred cows,” said Sen. Ben Nelson (D-Neb.), a leader of the bipartisan group that worked out the compromise.

However, Democrats said that some of the areas trimmed were muscle, not fat, and they hoped that those parts might be restored in the final bill. Funding for school construction took a big hit, and aid to states was reportedly cut from $79 billion to $39 billion.

“Not everybody is going to get every dollar they want, but it’s still a very strong package,” said Sen. Barbara Boxer (D-Calif.). “This package proves three words: ‘Yes we can.’ ”

Three GOP moderates -- Sens. Susan Collins and Olympia J. Snowe of Maine and Arlen Specter of Pennsylvania -- quickly declared their support for the compromise. But two other GOP moderates -- Sens. Lisa Murkowski of Alaska and George V. Voinovich of Ohio -- said they would oppose it.

Hoping to drive their vote total up to 61, Senate Democrats are also counting on Sen. Edward M. Kennedy (D-Mass.), who is battling brain cancer and has not been in the Capitol since he suffered a seizure on Inauguration Day. He returned to Washington on Friday to be available to vote.

Republican leaders said the compromise remained a bloated, wasteful spending bill, and they derided the scant GOP support as fig-leaf bipartisanship. “You can call it a lot of things, but you can’t call it bipartisanship,” said Sen. John McCain (R-Ariz.).

After approval, the Senate and House will have to work out their differences and then vote on a final version of the legislation before sending it to Obama for his signature.

Details of the compromise were slow to emerge, but it met the goal set by Obama and some moderate Republicans that the price tag end up in the neighborhood of $800 billion.

Senators described the compromise as a $780-billion measure, but its cost would be driven to around $820 billion by amendments already adopted on the Senate floor providing tax credits for people buying cars and homes.

The $85 billion in tax-cut savings included $5 billion by tightening eligibility for tax credits for workers and families with children, and $9 billion from scaling back business tax breaks.

The agreement was announced after days of negotiations involving close and deep involvement by the Obama administration.

The president called Reid late Thursday night. Emanuel called him five times Friday morning and joined the negotiations in person in the afternoon.

The White House announced that Obama would campaign for the bill early next week in Indiana and Florida. The president will also hold his first prime-time news conference Monday, another platform to push for the legislation.

Offering a sample of the way Obama will probably target skeptical lawmakers, aides to the president talked Friday about the effect his plan would have on specific states -- aiming, by implication, at the lawmakers who represent them.

Gibbs, the White House press secretary, explained the loss of nearly 600,000 jobs in January as “the equivalent of losing every job in the state of Maine.”

“In the past two months, the economy lost 1.2 million jobs,” he said. “That’s basically losing every job in Pittsburgh or in Cleveland.”

By taking his campaign on the road, Obama is making himself the public face of the stimulus legislation, an attempt to supersede the less popular congressional Democratic leadership, some analysts said.

With so much attention focused on the debate in Congress, Americans have begun to associate the stimulus bill with Democratic officials such as Senate Majority Leader Reid and House Speaker Nancy Pelosi of California, they said.

Obama’s travels are “a way of transferring the legislation from a Pelosi-Reid face to an Obama face,” said Peter Hart, a Democratic pollster. “And the Obama face is a more attractive one.”

Still, among Republican lawmakers especially, disenchantment with the stimulus package runs deep. These Republicans suggested that Obama’s roadshow would not influence their votes.

Sen. Bob Corker (R-Tenn.) said in an interview that Obama’s trip reflected a recognition on the president’s part that the stimulus package “is a fumble.”

Corker added: “I wish that instead of going to Indiana and Florida, he was sitting down with his [Democratic] colleagues here in the Senate and letting them be honest with him. I think that many of them realize what a mistake this is.”

In the Senate, the challenge facing negotiators was to trim the bill enough to win Republican support without losing Democratic votes. The fact that only a handful of Republicans signed on to the agreement was a blow to Obama’s hope that the bill would pass with support of a broad bipartisan majority. But at least three Republicans were needed to secure the 60-vote majority necessary to overcome procedural hurdles.

janet.hook@latimes.com

Christi Parsons and Peter Nicholas in our Washington bureau contributed to this report.