WASHINGTON – Congress laid the foundation for President-elect Barack Obama's economic recovery plan on Thursday with remarkable speed, clearing the way for a new infusion of bailout cash for the financial industry while majority Democrats proposed spending increases and tax cuts totaling a whopping $825 billion.
Two days after Obama personally lobbied for release of $350 billion in bailout funds, the Senate narrowly turned aside a bid to block the money.
Across the Capitol, Speaker Nancy Pelosi, D-Calif. said, "Immediate job creation and then continuing job creation" were the twin goals of the separate stimulus legislation. It recommends tax cuts for businesses and individuals while pouring billions into areas such as health care, education, energy and highway construction.
She and Senate Majority Leader Harry Reid, D-Nev., have pledged to have the economic stimulus bill ready for Obama's signature by mid-February.
Both houses debated Obama's call to release another $350 billion from the financial bailout package, but the Senate vote was the triumph he had sought. Despite bipartisan anger over the Bush administration's handling of the program to date, Democratic allies of the incoming president prevailed on a 52-42 roll call.
The vote followed a commitment by Obama to use as much as $100 billion of the funds to help homeowners facing foreclosure proceedings.
The money will be available in less than two weeks, at a time when there is fresh evidence of shakiness among banks.
The 44th president-to-be was at his transition office across town from the Capitol — and President Bush relegated to the role of virtual onlooker — as events played out at the dawn of a new Democratic era in government.
Obama has called for swift and bold action to confront an economic debacle unrivaled since the Great Depression.
The president-elect, who travels to hardhit Ohio on Friday to promote his economic program, also announced he would convene a "fiscal responsibility summit" in February to focus on long-term problems with the economy and the skyrocketing costs of benefit programs such as Social Security and Medicare. "We've kicked this can down the road and now we are at the end of the road," he said in a Washington Post interview posted on the newspaper's Web site.
In remarks on the Senate floor, Reid called the vote a victory for Obama, whom he said exhibited courage by seeking release of the money. "This was a test of leadership at a time when leadership is desperately needed," he said.
Obama said in a statement he was gratified with the result, adding, "I know this wasn't an easy vote because of the frustration so many of us share about how the first half of this plan was implemented."
Earlier, he hailed the stimulus blueprint as "a significant downpayment on our most urgent challenges."
The outlines of the economic stimulus measure reflected a change in political priorities, with an emphasis on spending and tax breaks designed to encourage production of alternative energy sources, make federal buildings more energy- efficient and weatherize homes.
At the same time, more traditional anti-recession spending was built in. There was more than $130 billion for health care, much of it to help states cope with the rising demand for Medicaid, the health care program for the low-income and a recession-era refuge for the newly laid-off.
More than $100 billion was ticketed for education, in part to help local school districts avoid the impact of state budget cuts. Billions more would increase spending for food stamps and unemployment benefits and finance expanded worker retraining programs.
A written summary showed $30 billion for highway construction, $10 billion for mass transit and rail, and $3 billion for airport improvements.
In all, the outline called for $550 billion in new spending and $275 billion in tax cuts. And the $825 billion total is virtually certain to grow as the legislation advances through Congress.
Initial Republican reaction was negative — and played on Obama's popularity to make a point.
"At first glance, it appears that my Democratic colleagues think they can borrow and spend their way back to prosperity with a half-trillion dollars of new spending and less tax relief than President-elect Obama has been talking about," said Republican Rep. John Boehner of Ohio, the party's leader in the House.
Democrats hold expanded majorities in both houses as the result of last fall's elections, and enactment of the stimulus measure is scarcely in doubt.
At the same time, lawmakers made clear they will not hesitate to substitute their own priorities for Obama's.
The president-elect's call for a business tax credit for each new job created was jettisoned by Democrats who questioned its value and preferred to use the money elsewhere. They agreed to Obama's separate proposal for a tax cut of $500 per worker and $1,000 per working couple. The documents made public did not say whether the money would come in the form of a one-time check or an adjustment in paycheck withholding.
The measure does not include money to help middle- to upper-income taxpayers ensnared in the alternative minimum tax, which was originally designed to prevent the extremely wealthy from avoiding payment of taxes but now threatens more than 20 million tax filers.
Several officials said the Senate was likely to include that provision in its version of the bill, a step that could push the overall total close to $900 billion.
Money for the financial bailout was a tougher sell by far.
Several newly elected Democrats campaigned as opponents of the program, which was launched last fall with an initial $350 billion, and lawmakers in both parties have expressed unhappiness with the Bush administration's management of the effort.
On the vote, 45 Democrats, six Republicans and one independent lined up behind Obama, while 33 Republicans, eight Democrats and one independent sought to block use of the funds. Among them was Sen. John McCain, who campaigned vigorously for creation of the original bailout program as Republican presidential candidate last fall.
Obama lobbied Democrats in private earlier in the week not to stand in the way of release of the remaining $350 billion, and a top aide followed up with a written commitment to Reid.
In it, Lawrence H. Summers, pledged that $50 billion to $100 billion would be dedicated to a "sweeping foreclosure mitigation plan for responsible homeowners."
In search of Republican support, Summers also said that apart from a commitment to help the Big 3 automakers survive, the new administration did not intend to intervene financially in individual industries outside the financial sector.
While the Senate vote assured the money would be available, the House debated a measure to attach conditions on its use. A vote was delayed.
EDITORS NOTE — Associated Press reporters Jim Kuhnhenn and Andrew Taylor contributed to this story.