Congress clears the way for second half of bailout

WASHINGTON (AP) — Congress laid the foundation for President-elect Barack Obama’s economic recovery plan Thursday with remarkable speed, clearing the way for a new infusion of bailout cash for the financial industry while majority Democrats proposed spending increases and tax cuts totaling a whopping $825 billion.

Two days after Obama personally lobbied for release of $350 billion in bailout funds, the Senate narrowly turned aside a bid to block the money.

Across the Capitol, Speaker Nancy Pelosi, D-Calif. said, “Immediate job creation and then continuing job creation” were the twin goals of the separate stimulus legislation. It recommends tax cuts for businesses and individuals while pouring billions into areas such as health care, education, energy and highway construction.

She and Senate Majority Leader Harry Reid, D-Nev., have pledged to have the economic stimulus bill ready for Obama’s signature by mid-February.

Both houses debated Obama’s call to release an additional $350 billion from the financial bailout package, but the Senate vote was the triumph he had sought. Despite bipartisan anger over the Bush administration’s handling of the program to date, Democratic allies of the incoming president prevailed on a 52-42 roll call.

The vote followed a commitment by Obama to use as much as $100 billion of the funds to help homeowners facing foreclosure proceedings.

The money will be available in less than two weeks, at a time when there is fresh evidence of shakiness among banks.

Obama has called for swift and bold action to confront an economic debacle unrivaled since the Great Depression.

The president-elect, who travels to hard-hit Ohio today to promote his economic program, also announced he would convene a “fiscal responsibility summit” in February to focus on long-term problems with the economy and the skyrocketing costs of benefit programs such as Social Security and Medicare.

The outlines of the economic stimulus measure reflected a change in political priorities, with an emphasis on spending and tax breaks designed to encourage production of alternative energy sources, make federal buildings more energy-efficient and weatherize homes.

At the same time, more traditional anti-recession spending was built in. There was more than $130 billion for health care, much of it to help states cope with the rising demand for Medicaid, the health-care program for the low-income and a recession-era refuge for the newly laid-off.

More than $100 billion was ticketed for education, in part to help local school districts avoid the impact of state budget cuts. Billions more would increase spending for food stamps and unemployment benefits.

and finance expanded worker retraining programs.

A written summary showed $30 billion for highway construction, $10 billion for mass transit and rail and $3 billion for airport improvements.

In all, the outline called for $550 billion in new spending and $275 billion in tax cuts. And the $825 billion total is virtually certain to grow as the legislation advances through Congress.