House Passes Stimulus Package

$819 Billion Jolt to Economy Aims to Reshape Education, Health Care; Deficit to Soar Article By JONATHAN WEISMAN, GREG HITT and NAFTALI BENDAVID The House passed an $819 billion tax-and-spending bill Wednesday, in a recession-fighting effort that would extend the reach of the federal government across the U.S. economy by reshaping policy on energy, education, health care and social programs. The House bill is one of the largest single stimulus packages in history, almost equal to the entire cost of annual federal spending under Congress's discretion. A parallel Senate measure, which is expected to come to a vote next week, is now valued at nearly $900 billion. Either bill, if enacted, would push the federal debt toward levels not seen since the second World War. The package embodies President Barack Obama's philosophy, stated in his inaugural address, that a nation in crisis has moved beyond "stale political arguments" over the size and reach of government. Although most of the money -- about $526 billion -- will be spent in 2009 and 2010, spending on some programs, including student-loan programs, clean-water projects and housing assistance, is expected to last well beyond the current recession. The House bill expands access to health care for the unemployed, represents perhaps the largest expansion of the federal government's role in education financing ever and begins what Mr. Obama has promised will be a push toward renewable energy that will continue throughout his presidential tenure. Also tucked inside is $335 million for programs that help prevent sexually transmitted diseases, and $50 million for the National Endowment for the Arts. The Senate version includes $70 million for a supercomputer at the National Oceanic and Atmospheric Administration and $75 million for smoking-cessation programs. The package, which would cost more than the entire Iraq War, would reverse the Bush administration's approach to boosting the economy. That approach relied heavily on tax cuts that tended to put money in the pockets of middle-class and more affluent Americans. The $275 billion in tax relief offered in the stimulus package focuses more on lower-income families. It also includes business incentives to spur job creation and a $500 payroll tax holiday for workers. The 244-188 vote was not what Mr. Obama had hoped for. A week of presidential wooing -- including a visit to the Capitol, a return visit to the White House by moderate House Republicans and a bipartisan cocktail party Wednesday night -- did not yield a single Republican vote. The president also lost 11 Democrats. View Full Image Getty Images House Minority Leader John Boehner, center, and every other Republican voted against the stimulus bill. House Republican leadership aides said the vote should force Democrats to compromise in the Senate, but White House aides were more sanguine. They said the package in the Senate has already moved toward Republican positions on key issues, making GOP votes more likely. Mr. Obama has said he wants a final compromise version by Feb. 13. By providing enormous sums for social programs and changing many of the rules to allow more people to take advantage of the programs, the Obama plan has prompted some Republicans to complain that the bill is becoming a back-door way to expand the social contract. The long-lasting nature of some of the items, say Republicans, has as much to do with pent-up policy demands of a Democratic Congress and White House as reviving a flailing economy. "The strategy under this bill is to throw billions of dollars in every bureaucratic direction, and cross our fingers and hope for the best," said Rep. Ken Calvert (R., Calif.) Wednesday during debate on the House floor. "We need to compare the cost of this package against the cost of doing nothing. The cost of nothing would be catastrophic," said Rep. David Obey (D., Wis.). Among the longstanding policy fights the bill weighs in on is whether to mandate that broadband cables controlled by telecommunications and cable firms be open to any Internet content provider; the House bill includes language favoring open access -- so-called net neutrality -- that telecoms have long opposed. It also secures an expansion of unemployment insurance for part-time workers that Democrats have sought for more than a decade. And it would push the private sector toward enterprises the free market has not favored, such as providing fast Internet access to rural areas and funding for alternative energy during a time of low energy prices. News, photos and background on key players and issues in the Obama administration's first 100 days from the WSJ and across the Web. In the education realm, the stimulus aims more than $125 billion at bolstering public education, an unusual federal intervention in a sphere usually left to state and local governments. It calls for spending $20 billion on school and college renovations. There's another $79 billion proposed for aid to the states to help them avoid education-related layoffs. In addition, more than $2 billion would go to the Head Start program, $13 billion to supplemental funding for high-poverty areas, and another $13 billion for special-education programs. The plan provides $5 billion for the construction and repair of public housing. Democrats say this will reduce a backlog of such projects and will mostly be distributed according to existing formulas. But Rep. Jerry Lewis (R., Calif.) depicts it as a quiet reversal of a 30-year trend of the government extracting itself from public housing construction. In an effort to directly help those hurt by the economic downturn, the plan provides $27 billion to continue unemployment insurance benefits through Dec. 31. It allots $9 billion to increase the current benefit from roughly $300 to $325 per week. The bill also expands COBRA, the law that allows a company's former employees to continue receiving group coverage. It would fund 65% of individuals' premiums for up to 12 months. And it allows workers older than 55, or those who have worked at a company for 10 years, to keep their COBRA coverage until they qualify for Medicare or find a new job. Among the plan's biggest departures is allowing those who are unemployed to enroll in Medicaid, the health program for the poor. It would temporarily expand Medicaid to allow millions of unemployed workers to qualify for benefits. Top House and Senate Democrats are also negotiating major changes to longstanding efforts to help workers who lose their jobs to foreign competition. The Trade Adjustment Assistance program, created in 1962, would be broadened to cover a wider range of workers, including employees in service industries, from accounting to aircraft maintenance, lawmakers and congressional aides said. As the sweeping measure moves to the full Senate next week, tussles loom that will eventually require Mr. Obama to referee differences between the House and Senate. The Senate is looking to add more business-friendly provisions, for example. Senate Finance Chairman Max Baucus (D., Mont.) is signaling a willingness to add amendments that would extend soon-to-expire tax breaks for U.S. timber companies, as well as strengthen a provision already in the bill that creates a tax benefit to encourage corporate debt restructuring. An issue of keen interest to a wide coalition of businesses, including real-estate, home builders and telecommunications companies, is a proposal added in the Senate to allow companies to defer taxes in 2009 and 2010 that they would otherwise owe for restructuring or retiring debt. As currently written, the bill would require corporations to eventually pay back the taxes, and only applies when companies use cash to buy back debt. Behind the scenes, a fight is brewing that pits Democrats from rural and urban areas against one another. At issue is how to divvy up $87 billion in spending on Medicaid, which is designed to ensure cash-strapped states don't cut services as a result of the recession. Under the House bill, 52.5% of the funds would be doled out under the regular formula for annual Medicaid disbursements; the balance would be parceled out under a new "bonus" program benefiting states with high unemployment rates. Who Gets What Critics say that "bonus" formula short changes poor rural states, where unemployment numbers are already high, but where the rate of decline in jobs isn't as steep as in urban areas. "We are getting killed," said Sen. Conrad of North Dakota. The Senate's version would split the funds up differently, with 80% to be doled out under existing rules and the balance spent under the "bonus" plan. Then there is the cost. The deficit, already in record territory, would likely reach between 10% and 12% of the gross domestic product in 2009 and 2010, roughly double the previous peacetime record, according to projections by Decision Economics Inc., a New York economic forecasting firm. That's partly because of the sheer size of the package, but also the long-term nature of some of the programs. Without fast action, federal debt levels could soon reach 100% of GDP, levels not seen since World War II, said Allan Sinai, chief economist at Decision Economics. That would put the U.S. in the same league as Italy, whose debt equals 104% of GDP. Democrats are focusing on rallying public support for the Senate vote expected next week. Mr. Obama met Wednesday morning with a corps of supportive chief executives and used the occasion to make his case that doing nothing in the face of the economic slump isn't an option. "The workers who are returning home to tell their husbands and wives and children that they no longer have a job, and all those who live in fear that theirs will be the next job cut, they need help now," he said to a group that included longtime allies Google CEO Eric Schmidt and Xerox CEO Anne Mulcahy. They are looking to Washington for action -- bold and swift." —Jane Zhang contributed to this article. Write to Jonathan Weisman at jonathan.weisman@wsj.com, Greg Hitt at greg.hitt@wsj.com and Naftali Bendavid at naftali.bendavid@wsj.com http://online.wsj.com/article/SB123315486943524321.html?mod=testMod