President-elect Barack Obama tried Sunday to shore up support in Congress for his ambitious economic policies, with his top advisers offering concessions on his economic-stimulus proposal and preparing to detail conditions for how the incoming administration will spend the second half of the $700 billion financial rescue package.
Emerging from a two-hour meeting in the Capitol with Obama advisers Lawrence Summers and Jason Furman, Senate Democrats praised the President-elect's team for agreeing to make changes to its stimulus proposal based off of concerns senators raised last week at a meeting with the president-elect’s senior aides.
The Obama team told about 35 Senate Democrats gathered at Sunday’s meeting that it would grow the size of an energy-tax incentive package and modify proposed tax credits for individuals and for businesses that hire new employees, according to meeting attendees. Also, with lawmakers raising concerns that the first half of the $700 billion of the financial rescue law was badly mismanaged, Obama’s team signaled it would lay out precisely how it would spend the second half of that package, which Congress is expected to consider as soon as this week.
“It’s very clear they’ve listened, they’ve heard and that they’re moving to respond,” said Sen. Kent Conrad, chairman of the Budget Committee, who questioned previously whether the tax credits in the stimulus package were enough to encourage new jobs. “It was very, very healthy. They’re not defensive, not arguing back, they’re listening, they’re attempting to hear and they’re responding.”
With Democrats holding a large majority in Congress, and Obama to be sworn into the White House in just nine days, Democrats are trying to dispel the notion that they are divided on how to stabilize the sagging economy. And unlike at last week’s meeting, Senate Democrats sounded positive about the changes Obama’s team is now signaling it will make to the package, which could cost more than $775 billion with its mix of tax incentives, aid to state governments, money for renewable energy and huge investment in the nation’s infrastructure.
“I’m not frustrated at all,” said Sen. John F. Kerry (D-Mass.), a member of the Finance Committee who last week criticized Obama’s initial proposal to give companies a $3,000 tax credit for new hires. “I think they’re moving effectively to the issues that we raised the other day, and there are significant changes put in place and being contemplated in the next hours, they’ll be making some judgments with respect to a lot of that.”
Sens. Barbara Boxer (D-Calif.) and Maria Cantwell (D-Wash.) both said that Obama’s team signaled that their new proposal would double the funds dedicated to energy tax credits, to at least $20 billion.
“They’re moving in our direction,” Boxer said, adding that the Obama team assured Democrats that the money given to state governments would reach cities and counties suffering from budget shortfalls.
As Obama’s team retools its stimulus proposal, it was coordinating with the outgoing Bush administration on when to request the second half of the $700 billion financial bailout law, known as the Troubled Asset Relief Program (TARP).
Under the initial law approved in Congress, once the administration tells lawmakers it wants to access the second installment of TARP, Congress must approve a resolution turning down that request within 15 days – or the Treasury Department can begin to use the money. If a simple majority in both chambers approves the resolution, the president would have to successfully veto the measure in order to dip into those funds.
The Bush administration is expected to imminently request the second installment, but the money would not be used until after Obama assumes office on Jan. 20. But concerns in Congress have grown about the Treasury Department’s use of the $350 billion it's already received, with critics saying that there has been poor transparency and accountability and that the package has not stabilized the volatile economy.
Obama’s team is trying to assure Democrats that it will use the next installment more wisely than the Bush administration spent the last one—and are hoping to avoid casting a veto on one of his first days in office.
Sen. Chris Dodd (D-Conn.), chairman of the Banking Committee, said that “there’s a willingness on the part of some Republicans to be supportive provided that there is some additional conditionality”
Obama’s team will draft a letter laying out some assurances on how it would spend the money, and Dodd says it should be broadened beyond the financial sector to include commitments to help stave off home foreclosures, more accountability and tighter requirements on executive compensation for private companies that receive TARP funds.
Dodd said he’s prepared to draft legislation, mirroring a bill proposed by Rep. Barney Frank (D-Mass) last week, to call for a broadening of the TARP program and for more oversight, but he said that a letter from Obama’s team – instead of additional legislation – could be sufficient to alleviate concerns in Congress.
“The Obama administration wants to rebrand this process,” he said. “They realize it has been terribly mismanaged, they realize in order to be effective in assisting our credit markets to get them unclogged and moving again, this program has to be far better run than it has been.
“They also made a strong point that they need these resources to do that,” Dodd said.
Allowing the second TARP installment amid widespread with public concerns about using taxpayer funds to bail out more industries will be tough for members of both parties, and it’s far from clear whether a letter from Obama’s team would assuage concerns about how the money would be used.
Majority Whip Dick Durbin (D-Ill.) said that Democrats are “mixed” about whether to try to block Obama’s access to the second installment of the package.
“People don’t want to make the same mistake twice,” Durbin said.
But Conrad, the Budget Committee chairman, said that Obama could win support by communicating with the public clearly how it would spend the money and how it would do things differently than the Bush administration.
“I think all means to communicate need to be utilized here,” Conrad said.