Congress Sends Obama $787 Billion Stimulus Package

Congress gave final approval to a $787 billion economic-stimulus package that imposes stricter limits on executive pay and bonuses at companies receiving Federal bailouts than those proposed by the Obama administration.

The Senate late yesterday voted 60 to 38 to approve the legislation. Three Republicans joined Democrats in favor of the measure. Earlier in the day the House passed the bill, 246 to 183, with no Republicans in favor. The votes give Barack Obama the first major legislative victory of his presidency.

“This historic step won’t be the end of what we do to turn our economy around, but rather the beginning,” Obama said in his weekly address today. “The problems that led us into this crisis are deep and widespread, and our response must be equal to the task.”

Democrats predict the plan will save or create 3.5 million jobs and help pull the nation out of the most severe recession in 70 years. The package also restricts executive compensation at all companies receiving assistance from the Treasury Department’s Troubled Asset Relief Program, not just those receiving “exceptional” aid as the Obama administration announced last week. The legislation limits bonuses and other incentive pay at those companies on a sliding scale according to how much federal aid they take.

Bonus Restrictions

Bonus restrictions will be imposed on senior executive officers and the next 20 highest-paid employees at companies that receive more than $500 million from TARP. Companies receiving between $250 million and $500 million will face restrictions on bonuses to their senior executive officers and their next 10 highest-paid workers. The limits will apply to the top five employees at companies receiving between $25 million and $250 million.

Companies such as Bank of America Corp., the largest U.S. lender, have been under political pressure to justify executive bonuses when they have received government aid. U.S. lawmakers on Feb. 11 prodded chief executives of Citigroup Inc. and seven other banks that got federal bailout money to increase the flow of credit and ease public anger over how the lenders used taxpayer funds.

The stimulus plan’s costliest item is a $400 payroll tax cut for individuals and $800 for couples. Retirees, disabled veterans and others who don’t pay payroll taxes will get a $250 payment. The bill also includes an alternative minimum tax cut.

Objections to Spending

Republicans argued that the bill contains too much government spending and, because of that, won’t do enough to boost the economy.

“I think everyone in this chamber on both sides of the aisle understands we need to act,” said House Minority Leader John Boehner, an Ohio Republican. “But a bill that’s supposed to be about jobs, jobs, jobs has turned into a bill that’s all about spending, spending and spending.”

The measure needed 60 votes to pass the Senate. The three Republicans voting for the bill in that chamber were Arlen Specter of Pennsylvania and Susan Collins and Olympia Snowe, both of Maine. Senator Edward Kennedy, a Massachusetts Democrat who is battling brain cancer, didn’t vote and one of Minnesota’s Senate seats remains vacant.

Most senators had left the chamber’s floor hours before the final tally was announced. The vote was held open for five hours until Senator Sherrod Brown, an Ohio Democrat, returned from his home state to cast the deciding vote for the bill. Brown had been in Ohio following the death of his mother earlier this week.

Business Tax Breaks

Businesses won several tax breaks, including faster write- offs for equipment purchased in 2009 and incentives for companies that produce and invest in renewable resources such as solar and wind power. A business tax break pushed by the U.S. Chamber of Commerce will ease near-term tax burdens on companies and buyout firms that restructure debt without entering bankruptcy.

Senator Judd Gregg, the New Hampshire Republican who withdrew this week as Obama’s commerce secretary nominee, voted against the plan. In a statement, he called it a “so-called stimulus plan” that “has become sidetracked by misplaced spending and a lack of attention to the true problems facing the nation.”

The stimulus plan provides a half-trillion dollars for jobless benefits, renewable energy projects, highway construction, food stamps, broadband, Pell college tuition grants, high-speed rail projects and scores of other programs. It raises the nation’s debt limit to about $12 trillion.

Unemployment

The U.S. labor market has lost 3.6 million jobs since the recession started in December 2007. Companies from Wal-Mart Stores Inc. to General Motors Corp. have announced cuts to their payrolls, highlighting the broad reach of the recession. FedEx Corp., the second-largest U.S. package-delivery company, said it will eliminate 900 jobs in its freight unit.

Other details of what provisions survived negotiations between the House and Senate were still emerging even as the plan headed for congressional passage.

Lawmakers dropped provisions barring funds from going to museums, arts centers and theaters. A ban on money to casinos, golf courses, zoos and swimming pools was retained. Lawmakers deleted provisions requiring businesses receiving stimulus funding to use E-Verify, a government program used to ensure workers are in the country legally.

CBO Report

The nonpartisan Congressional Budget Office said the stimulus package will cost $787 billion, rather than $789 billion lawmakers estimated earlier this week. The plan will pump $185 billion into the economy this year and $399 billion next year, the agency said.

“This country faces the greatest crisis that we’ve seen in terms of the economy since the ‘30s,” House Appropriations Committee Chairman David Obey, a Wisconsin Democrat, said as he urged passage of the bill. “The other tool normally available to us is monetary policy in the form of low interest rates through actions of the Federal Reserve. We’ve already fired that bullet -- the only bullet left is fiscal policy.”

Democrats released the text of the plan late the night before the vote, prompting complaints from Republicans they didn’t have enough time to review the legislation before voting on it.

“It is over a thousand pages,” said Representative Tom Price, a Georgia Republican. “It is physically impossible for any member to have read this bill.”

Economists such as Yale University’s Ray Fair say the first evidence that the legislation is working should be visible in consumer spending and retail sales, which they expect will stop declining around mid-year.

The next sign may come in business investment, as companies grow more confident about a pick-up in sales. The final signal of success would be a turnaround in employment.