ECONOMIC stimulus package deepening rift between Democrats, GOP

Thursday, November 8th 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ The rift grew deeper Thursday between Democrats and Republicans over government spending versus tax cuts, foreshadowing an all-out political battle in the Senate over how best to stimulate the moribund economy.

The Senate Finance Committee was to vote Thursday on a roughly $67 billion Democratic bill that is vastly different from the tax relief proposals made by President Bush and the $100 billion package passed last month by the GOP-led House.

Senate Majority Leader Tom Daschle, D-S.D., said debate could begin as early as Friday on the Senate floor, where Democrats may attempt to attach $20 billion more in spending for homeland security items _ extra spending that Bush says he would veto.

Despite the differences, Daschle told reporters that Congress could still meet Bush's deadline of Nov. 30 for final passage of a bill. But it will not be easy and could require 60 votes in the 100-member Senate to overcome blocking tactics.

Treasury Secretary Paul O'Neill said the Democratic bill, authored by Finance Committee Chairman Max Baucus, was ``heavy on new spending that will have little, if any, stimulative effect on the economy.''

Bush has four main priorities: repeal of the corporate alternative minimum tax; issuance of a new round of rebate checks aimed at lower-income workers; acceleration of income tax cuts now scheduled to take effect in 2004 and 2006, and enhanced expensing writeoffs for business investment.

The House bill reflects those priorities, but GOP leaders added numerous other Republican tax-cut priorities such as capital gains tax relief and were barely able to pass their measure. The Senate Democratic bill includes the rebate checks and some business tax relief but contains much more spending.

At a total cost of nearly $34 billion over 10 years, it would extend unemployment benefits by 13 weeks for all laid-off workers, provide them a 75 percent federal match for health insurance policies and temporarily boost federal Medicaid payments to states. Bush prefers a more limited unemployment benefit extension and grants to states for health insurance or other needs.

To solidify Democratic votes, Baucus added numerous other provisions that Republicans say would have questionable economic impact.

For New York Democratic Sens. Charles Schumer and Hillary Rodham Clinton, there is a 10-year, $5.3 billion package aimed at helping New York City recover from the Sept. 11 terror attacks. It includes a $4,800 wage credit _ normally reserved for companies that hire disadvantaged people _ for businesses in lower Manhattan that hire anyone.

For Sen. Robert Torricelli, D-N.J., the bill authorizes $7 billion in bonds for Amtrak high-speed rail projects and $2 billion in bonds for a new Hudson River crossing from New Jersey to New York.

Another last-minute change would create a one-year tax credit for between 10 percent and 20 percent for companies investing in rural broadband communications services, a priority of Sen. Jay Rockefeller, D-W.Va.

For farm-state senators, the Democratic bill provides $200 million for government purchase of farm products ``that have experienced low prices'' in 2000 and 2001 including apples, asparagus, bell peppers, pears, pumpkins and strawberries. There's another $3 billion to clear a backlog of rural development projects such as wastewater plants.

Still, there is some common ground that could produce an eventual compromise. All plans feature the $14 billion in rebate checks for lower-income people and those who didn't get the full $300, $500 or $600 checks the first time. All include enhanced expensing for businesses in some form and all provide aid to the unemployed.

Some senior lawmakers say Bush's direct involvement will be crucial. Others say politics must be put on the back burner.

``If the kids in the Senate get out of the way and leave it to us professionals that know how to do this, we'll get the job done,'' said Sen. Charles Grassley, R-Iowa, ranking Republican on the Finance Committee.