Bill headed for Senate OK expands government’s role in U.S. economy

The Treasury secretary is expected to unveil an aid plan for the financial industry today.

McClatchy Newspapers

WASHINGTON — The Senate’s vote on — and the likely approval of — an $838 billion economic stimulus plan today will signal a decisive new expansion of the government’s role in the economy.

The package will include tens of billions of dollars to help states pay for health care, education and highways. It will provide tax breaks for new car and home buyers. It will help to computerize health records and invest heavily in 21st-century renewable energy technology.

“Just think about Rosie the Riveter manufacturing solar panels and wind turbines,” said Sen. Amy Klobuchar, D-Minn., describing the bill’s long-term impact.

The measure’s reach also is limited, however. It won’t prove an immediate economic cure-all, and its passage is but a first step in a yearlong series of federal prescriptions for the ailing economy.

An hour before the Senate’s vote at noon today, Treasury Secretary Timothy Geithner is scheduled to unveil his new financial industry aid plan. The Federal Reserve’s efforts to melt frozen credit markets also are expanding. Later this spring, Congress will consider how to spend the rest of this fiscal year’s federal monies after President Barack Obama releases a detailed fiscal 2010 budget. The stimulus is but one part of a multi-front government counterattack on the recession.

The Senate stimulus plan cleared a key procedural hurdle Monday when members voted 61-36 to cut off debate. The vote today on the plan itself will come 13 days after the House of Representatives passed a similar version.

In the next step, top lawmakers from both houses will meet to reconcile the differences between the House and Senate bills. Once a compromise is reached, probably Thursday, each house will debate briefly and take final votes.

The negotiations promise to be tense but probably not hopeless, because the Democratic majorities in both houses will have voted to expand the government’s role in a wide variety of social and educational programs. Compromise should be on Democratic terms, because Republicans don’t have enough votes to impose their preference for less spending and bigger tax cuts.

“There certainly will be a change in direction compared to the previous administration,” veteran Washington budget analyst Stan Collender said.

There are significant differences, however. The Senate wants to give some consumers a break from the alternative minimum tax, at a cost of $70 billion over 10 years. The House didn’t include the provision.

The House wants to spend $20 billion for school construction and create a $79 billion “State Fiscal Stabilization Fund” to help pay education expenses. The Senate cut the construction money, and its stabilization fund is only about half the House’s amount.

There are a series of smaller disagreements. The Senate includes tax breaks for new car buyers and homeowners that the House does not, and the Senate has a one-year 50 percent subsidy for health-care premiums for unemployed consumers, while the House has a 65 percent subsidy.

With Democrats from both houses in charge of the talks, however, and Obama pushing hard for a package, the two sides are expected to split the differences and emerge with a plan to pump about $800 billion into the economy through Sept. 30, 2010.

Democrats will praise the details, Republicans will criticize them and independent analysts will offer mostly hedged praise. The last obstacle will be whether three Republicans continue to break ranks with their party.

to put through the final conference version in the Senate. If they don’t, it’ll be back to the drawing board, but few analysts expect that.

“This should create a little bit of momentum,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Mass. “Put enough warm coals into the fireplace and eventually you get flames.”