Bill to Revive U.S. Economy Nears Collapse

Legislation in Congress to shore up the economy essentially collapsed Wednesday as both parties sought to shift blame to the other side for the bill’s anticipated demise.

Lawmakers said the economic stimulus bill appeared doomed despite last-ditch efforts by President Bush and Republicans to pressure Democrats to reach a deal that would cut taxes and expand benefits for the unemployed.

With time running out on this year’s congressional session, the House was expected in the early morning hours today to pass a new version of a GOP bill that has Bush’s backing. But Senate Majority Leader Tom Daschle (D-S.D.) said that, despite some compromises by Republicans, the measure was sure to die in the Democratic-controlled Senate.

That would mean Congress later this week will adjourn for the year without approving legislation to bolster the ailing economy--a measure that lawmakers in both parties had said for months was urgently needed.

The latest GOP bill, endorsed by a handful of moderate Democrats, omitted some of the most controversial elements of the version the House passed in October, including tax rebates to many large U.S. corporations. It also provided 13 additional weeks of unemployment benefits, as well as new tax credits to help the jobless pay for health insurance.

But Democrats said the bill still provided too much corporate tax relief. They also strongly opposed the proposed health tax credits, fearing it was the opening gambit of a broader GOP effort to undercut the current system of employment-based health insurance.

Rep. William M. Thomas (R-Bakersfield), chairman of the House Ways and Means Committee, said Republicans had abandoned bipartisan negotiations and offered the new bill because Democrats would not compromise on key issues.

“The fact that the Democrats were unwilling to meet us halfway does not excuse us from our duty to take decisive action,” Thomas said.

But House Democrats responded that the push for the bill was a meaningless political exercise designed to give Republicans political cover.

“It will never, never, never become law,” said Rep. Charles B. Rangel (D-N.Y.) as the House began a debate Wednesday night that stretched into this morning.

That debate aired the vast ideological gap between the parties that has made their differences on the legislation so hard to compromise on.

Republicans said Democrats were focusing too much on spending programs that would do little to re-energize the economy and create jobs.

“Tonight we’re faced with a fundamental difference between Democrats and Republicans,” said Rep. Jack Kingston (R-Ga.). “Would you rather have an unemployment check or would you rather have a job?”

But Democrats said even the revised GOP bill was too heavily skewed to tax breaks for the affluent.

“This year we’re having a Republican Christmas,” said Rep. Lloyd Doggett (D-Texas). “That’s where Santa just stuffs the silk stockings.”

The expected failure of Congress to agree on an economic stimulus measure would culminate a months-long struggle marked by bitter partisanship, deep mistrust and unusually personal attacks. That stood in marked contrast to the more bipartisan, decisive way Congress has handled an array of other issues in the wake of the Sept. 11 terrorist attacks, including counter-terrorism measures and war-making authority for Bush.

The political dimension of the economic stimulus debate all but eclipsed the policy disputes at stake, as members of both parties focused Wednesday on finger-pointing. The end of this session may, in that respect, mark the beginning of the 2002 congressional campaign, when a key issue will be who gets blamed if the economy fails to recover.

The squabbling dashed once-high hopes that Congress would act quickly on a measure to bolster the economy, which was already turning sour before the terrorist attacks aggravated the situation.

The bill the House passed in October would have provided $100 billion in 2002 tax cuts for businesses and individuals. But the two parties deadlocked on the issue in the Senate, killing a Democratic alternative that would have provided more aid for the unemployed and less in tax breaks than the GOP wanted.

After weeks of negotiations to find a compromise collapsed Tuesday night, Republicans prepared for a House vote on their new version of the stimulus bill that they hoped would garner more Democratic support.

Bush threw his weight behind the bill as he made a rare journey to Capitol Hill on Wednesday morning. After private meetings with both Republicans and Democrats, Bush declared there was bipartisan agreement on the bill and urged Congress to pass it.

“This bill will pass the House,” Bush said. “It’s got enough votes to pass the Senate, and therefore, I look forward to working with both bodies in any way I can to convince those who are reluctant to get a bill done that this makes sense for America, so we can leave for Christmas knowing full well that we’ve done the people’s business.”

But the revised bill won public support from only three of the Senate Democrats who are crucial swing votes--John B. Breaux of Louisiana, Ben Nelson of Nebraska and Zell Miller of Georgia. Even if all 49 Senate Republicans lined up behind the bill, it still would fall short of the 60 votes needed to overcome procedural hurdles that can block controversial legislation.

Bush and his allies were hoping that House passage of the bill would increase pressure on other Senate Democrats, especially some up for reelection in 2002, to vote for the bill. And they hoped to pressure Daschle into scheduling an up-or-down vote on the legislation, meaning it would need 51 votes to pass.

Senate Republicans said they would try to bring the bill up for a vote Thursday but acknowledged that Daschle, as majority leader, had the power to unilaterally prevent a vote. A senior Senate Democratic advisor called the bill “dead as a doornail.”

The White House already has begun casting Daschle as an obstructionist out of step with efforts to achieve a compromise that would allow aid to flow to unemployed workers.

“The president will be delighted if Sen. Daschle would even just allow it to come to a vote,” said White House spokesman Ari Fleischer.

But Daschle accused Republicans of being too stingy with aid to the unemployed, saying their plans would “provide a lot more help to the largest corporations of this country than they do the unemployed workers and their families.”

Asked how he could reject any bill that provides even half a loaf on unemployment aid, Daschle said, “A bad deal is worse than no deal at all.”

The revised Republican bill would provide about $90 billion in tax cuts and unemployment aid in 2002; the cost over 10 years would be $157 billion.

Unlike the earlier version passed by the House, the bill provides an additional 13 weeks of unemployment assistance beyond the 26 weeks people ordinarily can receive. However, Democrats have sought more, including larger benefits and coverage for part-time and recently hired workers who generally do not qualify for benefits.

The GOP bill also includes a new tax credit to help unemployed people pay for health insurance, covering up to 60% of the cost of premiums. Democrats sought instead to have direct government subsidies of insurance coverage provided through workers’ former employers and argued that the tax credits don’t guarantee that people will get insurance, especially the elderly, sick and the others who have a hard time getting an individual policy.

Like the earlier version of the bill, the measure would provide cash benefits of up to $300 for individuals and $600 for couples who did not get the full benefit of the income tax rebate sent out earlier this year.

The bill also contained tax provisions that would reduce the 27% income tax rate to 25% in 2002, four years earlier than scheduled under the tax cut law enacted earlier this year. Bush had proposed accelerating the rate cuts in all of the tax brackets. Democrats were initially opposed to any speed-up but seemed willing to accept a cut for the 27% bracket if Republicans gave ground on worker assistance.

The bill had also provided aid to New York in the wake of the terrorist attacks, including authorizing $15 billion in tax-exempt bonds to help finance reconstruction of commercial and residential property.

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Times staff writer James Gerstenzang contributed to this report.