Haggling Begins On Final U.S. Stimulus Plan

The Senate named its negotiators to meld the bills and the House is expected to do so later on Tuesday.

U.S. lawmakers began haggling in earnest over a final package of tax cuts and spending on Tuesday after the Senate passed its $838 billion version of a rescue plan to fight the deep recession.

President Barack Obama wants the Democratic-controlled Congress to deliver a package by this weekend so he can sign it into law but must keep together a narrow coalition that wants the price tag lower -- at about $800 billion.

The Senate and House of Representatives must iron out differences between their two bills in what are expected to be marathon talks that could drag into next week.

The Senate voted 61-37 on Tuesday to approve its version, with support from just three Republicans. The House had earlier passed its $819 billion package with no Republican support.

The Senate named its negotiators to meld the bills and the House is expected to do so later on Tuesday.

Obama met House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid at the White House earlier on Tuesday.

"The speaker and I think we can get a lot of the work done in the first 24 hours," Reid told reporters.

On its own, the stimulus package is unlikely to fix the struggling economy because it does not address financial sector problems. As long as banks face losses and struggle to raise money, lending will be limited and so will economic growth.

The Obama administration is trying to address this problem on a separate track through a bank rescue program unveiled by Treasury Secretary Timothy Geithner on Tuesday.

To win the votes needed to ensure passage of the stimulus bill, the Senate cut tens of billions of dollars from its version, including $16 billion for school construction and $40 billion in direct aid to states facing growing budget gaps.

Those changes lured three Republicans who were needed to advance the bill in the Senate, where Democrats have only 58 of the 60 votes needed to clear potential procedural hurdles.

"This is a pretty delicate, fragile group that we've put together," said Senator Ben Nelson, a Democrat who helped Broker the compromise.

With the exception of cutting the size of the stimulus package to below $800 billion, Nelson said any other major changes would be "problematic."

In a sign of tough talks ahead, Senator Susan Collins, a Republican who also helped broker the deal, said she could not again vote for the measure if it stayed at the current size.

"I'm not saying what's in, what's out. I'm just saying the bottom line must be under $800 billion," she told reporters after the vote.

DIFFERENCES OVER SPENDING

Republicans have demanded the focus should be more on tax cuts than spending that they say will not boost the economy. Obama has rejected that, arguing such policies under Republican President George W. Bush contributed to the current crisis.

Obama has already said he would want some education money restored to the stimulus bill and other Democrats have said they believe the package should have more spending included.

Obama, visiting Florida to drum up support for the package, called the Senate vote "good news".

But House Majority Leader Steny Hoyer, a Democrat, warned that negotiations could stretch beyond Obama's weekend deadline and into the middle of next week.

The House and Senate approved different mixes of income tax credits and tax incentives to rejuvenate the shattered housing market, as well as tens of billions of dollars for infrastructure projects, health care and education.

Senator Max Baucus, a Democrat who will participate in the Senate-House negotiations, said he believed that provisions to offer $47 billion in tax breaks for buying a home or a new car would probably stay in but be modified.

"The main thing is the final conference report is going to be very similar to the Senate bill because that's where the votes are," he said.

There are big political risks for both parties in the struggle over the stimulus package, which at about $838 billion would be almost 6 percent of U.S. gross domestic product and about a quarter of the size of the federal budget.

Congressional elections are less than two years away and, without some improvement in the economy, Democrats could be punished by voters in 2010.