House and Senate negotiators reach deal on stimulus bill

House and Senate Democratic leaders, negotiating into the night to forge a compromise with three moderate Republican senators, reached agreement Wednesday on a $789-billion economic recovery bill that President Obama has called crucial to pulling the country out of its worst financial crisis since the Great Depression.

The bill, slimmed down and reworked to win the handful of GOP votes needed to ensure final approval by the Senate, would finance a flurry of infrastructure and construction projects, extend unemployment benefits, subsidize healthcare coverage for those out of work, and provide tax relief for many. Democrats say it will create or preserve 3.5 million jobs nationwide. The House could vote on the bill as soon as today, and the Senate shortly after.

Republicans lined up early against the bill, saying it was bloated with unnecessary government spending programs, featured too few tax cuts and would substantially increase the national debt. Until the three GOP moderates defected late last week, it remained possible that the minority would be able to delay the bill from moving forward and perhaps force radical changes.

Some Democrats complained that the package was not big enough but said they had no choice but to accept it if the measure was to win the votes of deficit-minded senators. The stimulus package was the first major initiative of the Obama administration and a crucial first step in its plan for reviving the nation’s troubled economy.

“There is no choice here, colleagues,” Senate Finance Committee Chairman Max Baucus (D-Mont.) told fellow senators gathered in an ornate room in the Capitol to seal the deal. “We must enact this legislation to get jobs in this country.”

The agreement came faster than many on Capitol Hill expected, but it didn’t arrive without moments of high drama.

At one point Wednesday, Senate Democrats enthusiastically declared to the media that an agreement had been struck -- only to discover moments later that no House members had shown up to put their stamps of approval on the final details. In fact, House leaders -- whose members had voted for a substantially larger measure -- refused to acknowledge that a deal had been reached.

That led to a two-hour session in House Speaker Nancy Pelosi’s office, where intensive efforts were made to resolve a sticking point -- the terms of a provision authorizing money for school renovation.

Support from three moderate Republican senators, Susan Collins and Olympia J. Snowe of Maine and Arlen Specter of Pennsylvania, was necessary to avoid a filibuster by Republican hard-liners in the Senate. The three, who helped shape the package approved by the Senate, said they would not support a final bill that did not reflect the more than $100 billion in spending cuts that they helped slice out of the bill last week.

As a result, almost $50 billion had been slashed from the bill that passed the Senate on Tuesday.

But House spending provisions involving aid for budget-strapped state governments and school modernization were added during the negotiations. Both were important to the White House, which took a leading role in pushing the parties to an agreement.

The expenditures were offset in the bill by the elimination of a provision that would expand Medicaid benefits and the tweaking of several tax cut provisions concerning, among other things, the purchase of homes. First-time home-buyers could qualify for an $8,000 tax credit, up from the existing $7,500 but substantially less than a proposal in the Senate bill that would have raised it to $15,000 for all of those buying their primary residence, not just first-time buyers.

Senate Majority Leader Harry Reid declared the compromise bill an improvement. The new bill, he said, “creates more jobs than the original Senate bill and spends less than the original House bill.”

Collins, Snowe and Specter, who were deeply involved in the final negotiations, said they would support the compromise, likely ensuring that it will have the necessary 60 votes to reach the floor of the Senate for a final vote.

“This is obviously a very difficult vote,” Specter said. “But I believe it is indispensable that strong action be taken.”

Late Wednesday, after the deal had been struck, Obama thanked “the Democrats and Republicans in Congress who came together around a hard-fought compromise that will save or create more than 3.5 million jobs and get our economy back on track.”

It was an emotional day for the more liberal members of Congress, who complained that their party, which holds strong majorities in both chambers, had acceded to the demands of three senators from the minority.

“I think our side gave in too much in order to appease a few people,” said Sen. Tom Harkin of Iowa. He said Democrats should have dared Republicans to filibuster and “see what the public outcry” would have been. “I think the people are getting shortchanged,” Harkin said.

Meanwhile, Republicans complained they had been left out of the negotiations entirely and alleged that the Democrats had engaged in the same kind of “midnight deal-making” that the GOP was accused of when it was the party in power.

“After promising the American people transparency and openness, it now seems that the House Democratic leadership has broken their word and cut a backroom deal on a trillion-dollar-spending bill in the dark of night,” said Michael Steel, a spokesman for House Minority Leader John A. Boehner (R-Ohio).

The speed of the negotiations was attributable in part to the presence of a team from the White House, which injected itself deeply in the process. The president’s chief of staff, Rahm Emanuel, met with members late Tuesday night, leading an administration lobbying team that also included Budget Director Peter R. Orszag, Deputy Budget Director Rob Nabors and congressional liaison Phil Schiliro.

Orszag took part in more meetings Wednesday on the Hill.

A White House official described Emanuel, a former House member from Chicago, as the “chief architect of the White House-congressional negotiations.”

Vice President Joe Biden helped by working the phones Tuesday. He concentrated on the three “gettable” Republican members of the Senate, the White House aide said. He would tell them, “Here’s our bottom line,” and ask, “What do you need?” to support the package, the official said on condition of anonymity because he was not authorized to speak on the issue.

Rep. Henry A. Waxman (D-Beverly Hills) said he was in a meeting Tuesday night in Pelosi’s office in the Capitol with Emanuel, Orszag and other top administration officials and members of Congress. “We had to do some hard bargaining,” Waxman said in an interview.

Waxman said Emanuel and the White House team were helping bridge disagreements over what the stimulus should contain. He said he wanted more money to go toward helping people maintain health insurance in the event of job loss, among other priorities.

“It was not easy,” he said, in part because the Senate bill devoted more money to tax cuts, making less available for the kinds of programs that Waxman and others favored.

So the White House team was, in essence, “trying to figure out a way to do what I wanted without spending more money to do it,” Waxman said.

The compromise measure would provide $87 billion in Medicaid aid and $54 billion for a “state fiscal stabilization fund” to help states facing financial pressure that could lead to cuts in jobs and services. It provides tax breaks of $400 for most working Americans and $800 for couples.

It boosts unemployment benefits by $25 a week for millions of jobless Americans and allows some to get an additional 33 weeks of benefits. It also provides new subsidies under the federal law known as COBRA to help those who have lost their jobs keep health insurance they were receiving through their employers.

The measure extends unemployment benefits by 20 weeks in most states and by 33 weeks in high-unemployment states such as California. It also includes a measure to shield millions of taxpayers from a tax increase under the alternative minimum tax.

And it includes $4.5 billion to repair federal buildings, using green technology to increase their energy efficiency.

The National Science Foundation would receive $3 billion. And $7.2 billion is appropriated to increase broadband access and usage in unserved and underserved areas of the country. Expanding access to the Internet is intended to stimulate innovation, economic growth and job creation.

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joliphant@tribune.com

richard.simon@latimes.com

Noam N. Levey and Peter Nicholas in our Washington bureau contributed to this report.