Negotiations resume amid new optimism toward economic stimulus bill

Thursday, December 13th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ Republicans and Democrats were back at the bargaining table Thursday after concessions by both sides reinvigorated negotiations over economic stimulus legislation to grant broad benefits to the unemployed and cut taxes for individuals and businesses.

A bipartisan group of House and Senate members, joined by Bush administration officials, met behind closed doors for a second day, with prospects brightening that a deal could be struck before Congress recesses for the year.

White House spokesman Ari Fleischer said President Bush ``is pleased to see that members are talking and trying to find a way out of the gridlock.''

Talks focused initially on the level of extra benefits for the jobless and health care aid, including whether to increase federal Medicaid payments to states so that more people could be covered. The negotiations were likely to continue all day and possibly into the weekend, participants said.

``I hope we get something done. I think everybody wants to,'' said House Speaker Dennis Hastert, R-Ill.

The sessions resumed Wednesday night, shortly after Senate Majority Leader Tom Daschle offered to back a modest acceleration of income tax cuts. He also said a deal no longer had to pass muster with two-thirds of the 50 Senate Democrats, which Republicans had insisted would effectively block their tax cuts.

Daschle, D-S.D., told reporters Thursday that he is ``willing to try'' to sell income tax cuts to Democrats as part of a balanced package.

``We can't go nearly as far as the Republicans would like, but we're willing to at least make an effort,'' he said.

Those moves by Daschle followed important concessions by President Bush on unemployment benefits and health insurance aid sought by Democrats. The White House also has exerted steady pressure for compromise.

``We're going to the heart of the matter,'' said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee.

Daschle, D-S.D., said earlier Wednesday it would be almost impossible for rank-and-file Democrats to support earlier effective dates for any of the income tax cuts scheduled to go into effect in 2004 and 2006. Yet several sources said Daschle offered, in a late-afternoon meeting on Capitol Hill with Treasury Secretary Paul O'Neill, to agree to reducing the 27 percent rate to 26 percent.

Bush gained some support from centrist Senate Democrats by bringing aid in his stimulus plan to the unemployed to nearly $30 billion. His revised proposal includes a new 50 percent health insurance tax credit that could be paid to jobless people in advance and a 13-week extension of unemployment benefits.

Bush also eased up on his income tax proposal, which originally sought to make all the future rate cuts in the recently enacted 10-year, $1.35 trillion tax relief plan take effect in 2002. Bush now wants to move up to 2002 only the cut in the 27 percent rate to 25 percent and has dropped his demand that the corporate alternative minimum tax be repealed.

A senior Treasury official, speaking with reporters on condition of anonymity, said the Bush administration has moved a long way toward Democratic positions in favor of assisting displaced workers and limiting tax cuts.

``This is the middle ground,'' the official said. ``We're trying to do everything we can to get Daschle on board.''

Details of Bush's revised plan, as released by the Treasury Department, include:

_A new round of rebate checks of up to $300 for individuals and $600 for married couples, aimed at millions of people who didn't get checks earlier this year or got less than the full amount.

_Reducing the 27 percent income tax rate to 25 percent effective Jan. 1, 2002, four years ahead of schedule. That rate currently begins applying to taxable income of $27,950 for individuals, $46,700 for married couples.

_Bonus depreciation of 30 percent for three years, allowing businesses to immediately write off a portion of new business investments made after Sept. 11. Small businesses would be able to expense up to $35,000 of new investments, also over three years. Businesses also would be able to deduct current losses against taxes paid as long as five years ago, up from two years.

_An additional 13 weeks of unemployment benefits for workers who qualified for benefits after March 15, 2001.

_A 50 percent tax credit for unemployed workers to help defray costs of health insurance. A jobless person could get the credit up front and it would be available even if the person owed no federal income taxes.

_Grants of $3 billion to states for other jobless needs and acceleration of $4 billion in federal unemployment funds to states that wouldn't otherwise be available until 2003.