Stimulus Bill on Way to Its Death

A bitterly divided Senate is expected today to shelve a key part of President Bush’s domestic program: legislation that seeks to boost the economy by cutting taxes and expanding aid to the unemployed.

Senate Majority Leader Tom Daschle (D-S.D.) said Tuesday he plans to withdraw the bill from the Senate floor after a pair of showdown votes that are all but certain to end in an impasse.

“It’s with great regret I will pull the bill,” Daschle told reporters just one day after Bush renewed his call for the stimulus legislation as part of his new budget.

The death of the bill would likely dash hopes for any further tax cuts for the year--including long-discussed proposals to provide cash payments to people who did not receive tax rebates last year, new corporate tax breaks and Bush’s plan to speed up implementation of last year’s income tax cuts.

Two months ago, the Senate killed a stimulus package that had been approved by the House, but at the time lawmakers said the issue would be revived when Congress returned from its holiday recess.

Bush has incessantly prodded the Senate to pass the stimulus measure, saying it is needed as an “insurance policy” even as the economy brightens. The bill’s anticipated derailment bodes poorly for bipartisan cooperation on other domestic issues in this election year.

“I’m very disappointed,” Bush told reporters after hearing of the impending Senate action. “There’s a lot of workers who hurt, and they need help. Our economy, while there’s some good news, needs more stimulus.”

Democrats said they may try later this year to expand unemployment benefits as part of another bill, but many Republicans are sure to oppose such a move.

Democrats Balked at Business Tax Breaks

The stimulus bill, first proposed in the wake of the Sept. 11 terrorist attacks, fell victim to election-year political pressures that drove the parties into warring factions on economic issues that are crucial to their core constituencies. Democrats, for instance, balked at the extent of tax breaks that Republicans sought for businesses.

The bill also was hurt by skepticism--among lawmakers as well as outside analysts--about whether its provisions would substantially help an economy that already appears on the mend. Indeed, the final blow may have come from the economy itself. Amid signs the recession is ending, questions grew about whether any stimulus bill was needed.

The long and tortured process that led to the bill’s likely demise speaks volumes about how hard it is for a narrowly divided Congress to set economic policy in a timely fashion.

“It’s an indictment of our ability to get together and act in the public interest,” said Sen. Phil Gramm (R-Texas).

As such comments indicate, the end of the legislative debate over the stimulus bill would mark just the beginning of a fierce political argument over who is to blame for Congress’ failure to respond to the nation’s economic ills.

Republicans have already begun accusing Democrats, especially Daschle, of refusing to compromise for political gain.

GOP Only Wants Its Package, Daschle Says

“The Daschle Democrats, in a cynical effort to score political points against this president, have chosen to fire a direct shot into a limping economy by killing the economic stimulus package,” said Senate Republican Leader Trent Lott (R-Miss.).

But Daschle, in turn, accused Republicans of blocking a stripped-down version of the measure he offered earlier this year as a compromise.

“They don’t want a stimulus package unless it is their stimulus package,” Daschle said.

Beyond the finger-pointing, another factor sapping the bill’s momentum has been the emergence of budget deficits. Members of both parties are increasingly concerned that the long-term costs to federal coffers of cutting taxes and increasing spending would outweigh the short-term benefits to the economy.

That suggests a silver lining for fiscal conservatives in the collapse of the stimulus bill: If Congress does not enact its provisions, deficits may be smaller. For instance, the Bush budget projects a deficit in fiscal 2003 of $80 billion. But virtually all of that deficit is premised on passage of a stimulus bill.

The Republican Study Committee, a conservative group in the House, is arguing that if the stimulus bill remains sidetracked, lawmakers should aim to draft a balanced budget.

The debate over the stimulus bill spotlighted basic differences between the parties on economic policy: Republicans argue that the flagging economy would be better served by tax cuts to businesses to spur job creation, while Democrats said the bill should focus on helping the unemployed weather the downturn.

The GOP-dominated House passed two versions of a stimulus bill late last year. Both centered on tax cuts for individuals and businesses, including Bush’s proposal to speed up scheduled reductions of income tax rates and roll back the corporate alternative minimum tax.

Democrats who control the Senate pushed a bill more heavily weighted to providing aid to unemployed people.

After the Senate failed to agree on the issue in December, Republicans accelerated their efforts to blame Daschle for blocking action. In response, Daschle early this year proposed a stripped-down version of the bill.

Faced with pressure to move on to other matters, Daschle scheduled votes for today to close debate on his bill and on the Republican alternative. But in his comments Tuesday, Daschle said that neither measure would draw the 60 votes needed to close debate and proceed to a final vote.

Republicans agreed with that assessment.

Greenspan Comments Hurt Compromise Odds

Both sides insisted they were prepared to continue negotiations to revive the stimulus issue later this year. But many lawmakers also agree that compromise seems more remote than ever, especially following Federal Reserve Chairman Alan Greenspan’s comments last week that the economy had improved enough that a stimulus bill was probably not necessary.

In recent days, both sides have been asserting that the other party’s proposal is so misguided it would be better to do nothing.

Citing advice from economists that Congress should “do no harm,” Daschle said, “The Republican package does serious harm to the budget, to fairness in tax law and to a number of other issues that the American people care deeply about.”

Summing up GOP attitudes toward the Daschle bill, House Majority Leader Dick Armey (R-Texas) said, “If the Senate . . . cannot do anything good, we’re better off doing nothing at all.”

Times staff writer Edwin Chen contributed to this report.