Parties jostle for political gain as economic stimulus package scuttled

Thursday, December 20th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ The Senate staged a political burial Thursday for economic stimulus legislation, each party seeking political gain while economists debated the impact on the recession.

``That bill ought to get ... to my desk so that we can help the unemployed people and help grow jobs,'' said President Bush, although administration aides said he would not summon the Democratic-controlled Senate back into session to resurrect the measure.

``The longer we're unsuccessful in addressing it, I think the more responsibility for the economic circumstances the Bush administration must take,'' countered Senate Majority Leader Tom Daschle, D-S.D.

A phalanx of Republicans blamed Daschle for scuttling the bill by blocking a vote in the waning hours of the congressional session. Supporters appeared to have at least 52 votes, including three Democrats, but they could not count the 60 votes necessary to trump Daschle's opposition.

In a scripted sequence, Republican Leader Trent Lott asked to have the bill placed before the Senate for a vote. Daschle countered with a proposal to pass only a 13-week extension in jobless benefits. Each man objected to the other's proposal, sealing the bill's fate.

``It serves no one in the end to bring up a very political package in the last few hours, when we know we don't have the votes,'' said Sen. John Breaux, D-La., who played a leading role in attempts to forge a compromise.

Another Democratic supporter of the measure, Sen. Zell Miller of Georgia, sounded less philosophical. Conceding that the bill was far from perfect, he said, ``you can eat half a loaf. Having no loaf at all...somebody goes hungry,'' he said.

The measure, blessed by Bush and pushed through the Republican-controlled House in a pre-dawn vote, was a blend of extended unemployment benefits for victims of the recession and funds to help the newly jobless with health insurance. It also included rebates for lower wage earners who did not receive checks last summer, and a variety of tax cuts for individuals and businesses. The bill carried a three-year price tag of $218 billion.

Negotiations had proceeded over several weeks to the point where each side had made concessions, and agreement seemed possible. Nominally, talks broke down over competing proposals for health insurance help for the jobless, but there were political calculations, as well.

Aides to several congressional Democrats, speaking on condition of anonymity, said they had detected no public groundswell for an economic stimulus bill, and concluded there would be no political cost to blocking the measure.

At the same time, House Democrats already have test-marketed commercials criticizing GOP lawmakers for casting a vote to give hundreds of millions of dollars to profitable corporations _ and said they would do so again next year.

At the White House, officials said Bush likely will continue to attack Daschle over his handling of the issue, and that the president believes he can inoculate himself and his party against the perception that Republicans don't care about working people by continually doing so.

``It seems to me so incredible that the Senate of the United States Congress can go home with a happy face for the holidays,'' without passing the measure, said Treasury Secretary Paul O'Neill.

The events unfolded as the economy provided some encouraging signs.

The number of workers filing new claims for unemployment insurance dipped to a five-month low, suggesting the worst of the layoffs seen after the Sept. 11 terror attacks may be over.

But economists warned that the country is still in for a period of rising unemployment because of lingering weakness from the recession.

Private economists said Congress' failure to pass the measure won't doom the country to a longer recession, but will mean a weaker-than-expected recovery forecast for early next year.

David Wyss, chief economist at Standard & Poor's Co. in New York, said he was reducing his forecast for overall economic growth for the second half of 2002 to 3.75 percent, a half percentage point below the 4.25 percent he was predicting with the economic stimulus package.

Wyss said this will mean that the unemployment rate will probably peak at 6.7 percent next year rather than 6.2 percent, meaning an additional 250,000 people will lose jobs.

Bruce Steinberg, chief economist at Merrill Lynch in New York, said the economy will be helped by the parts of last spring's 10-year $1.35 trillion tax cut were due to take effect next year. Increased government spending on defense and homeland security also will help, he said.

``Even without additional budget action, roughly $90 billion of fiscal stimulus has already been enacted,'' Steinberg said.

Other analysts agreed that the trade-off with the loss of the stimulus bill may be that the Fed, which has already cut rates 11 times, will reduce rates one or two more times early next year and then leave rates at this lower level for a longer period.