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Obama stimulus faces intense Senate scrutiny

world Updated: Feb 03, 2009 00:45 IST

AP
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President Barack Obama said on Sunday that the peaceful elections in Iraq are "good news" for US troops and their families, and he agreed with the suggestion that a substantial number of those troops could be home within a year. "I think that you have a sense now that the Iraqis just had a very significant election with no significant violence that we are in a position to start putting more responsibility on the Iraqis and that's good news not only for the troops on the ground but for the families who are carrying an enormous burden," Obama said in an interview with NBC's Matt Lauer before the American football championship game.

Asked if he could assure the troops "that a substantial number of them will be home" a year from now, the president answered "yes."

On the homefront, Obama said the failing US economy was still months from reaching a bottom as he pressed Congress to move swiftly on a $800 billion-plus stimulus package.

With the president continuing to forecast a dire short-term economic outlook, senators from both parties signaled a readiness on Sunday to negotiate, particularly on Republican proposals aimed at reinvigorating the housing market. The housing collapse in the second half of last year set in motion the worst U.S. economic decline in 80 years

"It's going to take a number of months before we stop falling," Obama said in a television interview.

The president had a bipartisan group of 15 lawmakers at the White House on Sunday to watch the game as he continued personal interaction with legislators _ part of his pledge to change the bitterly partisan atmosphere that has gripped the US political system in recent decades.

The stimulus plan passed in the House of Representatives last week without a single Republican vote in support, and faces intense scrutiny in the US Senate this week.

Obama has been fighting hard for quick passage of the stimulus package, declaring it was needed immediately to help stem the economic slide. He also contends both political parties need to unite behind the effort that could send the US budget deficit quickly soaring past $2 trillion, creating a fiscal and political time bomb.

Initial efforts _ a personal visit to the Capitol building to meet lawmakers of both parties and cocktails with them at the White House _ paid no dividend last week when every House Republican rejected the measure as too heavily loaded with government spending and too little keyed to tax relief.

"I've done extraordinary outreach to the Republicans," Obama said in the television interview, forecasting a significant number of Republicans eventually would fall in line.

If the stimulus plan is to survive a Senate vote, Obama will need Republican support because his fellow Democrats, while in the majority, do not yet hold the 60 seats needed to overcome a Republican filibuster _ a parliamentary move that would keep the plan from going to a vote.

On Sunday, a key Democratic senator, New York's Charles Schumer, said he was open to Republican proposals that would provide a $15,000 tax credit to every home buyer and lowering mortgage interest rates to 4.5 per cent.

"I think we will get real agreement on the housing part," Schumer said on CBS television.

Republicans in both houses have attacked the Obama plan _ especially as it was voted out of the House of Representatives last week _ calling it a grab bag of Democratic spending initiatives that will not quickly stimulate the economy and only serve to burden the federal government with new and lasting budget obligations. The top Republican in the Senate, Mitch McConnell of Kentucky, and his Texas colleague, Kay Bailey Hutchison, told Sunday television interviewers they want the stimulus package to be: "Timely, temporary and targeted."

"If we're going to spend anywhere near this," McConnell said on CBS, "we need to target it directly. It needs to be timely, temporary and targeted."

In tandem with the stimulus program, the Obama administration was moving to reformulate how to spend the second half of a $700 billion financial bailout plan put in place in the last months of the administration of President George W. Bush to avoid the collapse of the country's financial system.

Treasury Secretary Timothy Geithner has said the administration was considering a government-run "bad bank" to buy up financial institutions' so-called toxic assets. But some officials now say that option is gone because of the potential cost, with some estimating it could take as much as $2 trillion to cleanse financial institutions' balance sheets.

Still, many ideas under consideration could end up costing hundreds of billions beyond the original price tag. Obama advisers would not rule out seeking more than the $350 billion already set aside.

The Bush administration's spending of the first $350 billion of the bailout package drew heavy bipartisan and public criticism because it went overwhelmingly to bankers who have not put much of the money into the credit system. Obama only gained access to the second $350 billion with written assurances to Congress that the funds would reach Americans facing home mortgage foreclosures and in need of credit for autos and other big ticket items. While facing Republican opposition in Congress, Obama's stimulus plan was receiving support from most Republican governors because it would send billions to states for education, public works and health care. State treasuries are drained by the financial crisis, and governors are desperate for money from Washington. During the final three months of 2008, the national economy recorded its worst contraction in a quarter-century, declining 3.8 per cent. That rate could accelerate to 5 per cent or more this quarter.