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Obama Presses for Quick Jolt to the Economy

WASHINGTON — President Obama on Friday stepped squarely into the fractious effort in Congress to assemble an $825 billion economic recovery package, seeking to quell criticism from both parties and to retain leadership on an initiative that could define his term.

President Barack Obama in an Economic Stimulus meeting
CNBC.com
President Barack Obama in an Economic Stimulus meeting

Through his budget director, Peter R. Orszag, Mr. Obama committed to seeing that three-quarters of the combined spending and tax cuts would be used within 18 months, to provide the fiscal jolt that economists say is needed to jump-start the economy.

Mr. Orszag’s letter of assurance to Congress sought to rebut some Republicans’ accusations that little of the spending in the House version of the package would get into the economy quickly enough to be effective.

For the first time as president, Mr. Obama also met with the leaders of both parties in Congress, in keeping with his campaign promise of bipartisanship.

Yet in a polite but pointed exchange with the No. 2 House Republican, Eric Cantor of Virginia, Mr. Obama took note of the parties’ fundamental differences on tax policy toward low-wage workers, and insisted that his view would prevail.

At issue is Mr. Obama’s proposal that his tax breaks for low- and middle-income workers, including his centerpiece “Making Work Pay” tax credit, be refundable — that is, that the benefits also go to workers who earn too little to pay income taxes but who pay Social Security and Medicare taxes. Republicans generally oppose giving such refunds to people who pay no income taxes.

“We just have a difference here, and I’m president,” Mr. Obama said to Mr. Cantor, according to Rahm Emanuel, the White House chief of staff, who was at the meeting.

Mr. Emanuel said that Mr. Obama was being lighthearted and that lawmakers of both parties had laughed.

Mr. Cantor, in an interview later, had a similar recollection. He said the president had told him, “You’re correct, there’s a philosophical difference, but I won, so we’re going to prevail on that.”

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“He was very straightforward,” Mr. Cantor added. “There was no disrespect, but it was very matter-of-fact.”

In a day focused on the economy, Mr. Obama also attended what is now a daily economic briefing at the White House, met with his staff about his first budget, due next month, and conferred privately with Timothy F. Geithner, his Treasury secretary nominee, who is likely to be confirmed by the Senate on Monday.

As for the stimulus package, the president told reporters, “It appears that we are on target” toward adopting the recovery plan before Congress recesses for Presidents’ Day on Feb. 13.

As he opened their meeting, Mr. Obama told the lawmakers that “there are still some differences around the table and between the administration and the members of Congress about particular details on the plan.”

“But what I think unifies this group,” he said, “is recognition that we are experiencing an unprecedented, perhaps, economic crisis that has to be dealt with and dealt with rapidly.”

Having invited lawmakers to present their ideas for doing that, Mr. Obama is getting an earful. The process is shaping up as a first major test of his presidential leadership, with many of his campaign promises, as well as the livelihoods of millions of Americans, at stake.

Mr. Obama did not lay down a comprehensive plan but made clear his policy preferences, reflecting campaign promises on energy, education and health care, along with traditional stimulus proposals for aid to states and expanded unemployment compensation and food stamp benefits.

Mr. Obama left it to the Democratic-controlled Congress to fill in the details. His differences with his own party in the House are mostly minor, and the House Democrats’ package is expected to be passed next week. But a new Senate plan diverges in several ways from what House Democrats and Mr. Obama favor.

The Senate bill would restrict states from using their federal relief to expand Medicaid to cover more people. And while the House version would provide a single extra payment to Social Security disability beneficiaries, the Senate version would give $300 to all Social Security recipients and to disabled veterans.

Democrats are eager to help Mr. Obama succeed, knowing that their success rides on his. Still, they are refusing to cede their status as leaders of a co-equal branch of government, as they say Republicans did under President George W. Bush.

Republicans, for their part, do not want to be seen as obstructionists of a popular new president in a time of national distress. Yet especially in the House, where most Republicans hail from ideologically conservative districts, the opposition members view the stimulus debate as an opportunity to rededicate their divided, demoralized party around the one idea that unites it: big tax cuts, even if that means opposing Mr. Obama.

But House Republicans do not have enough votes to prevail. And events on Friday made clear they do not pose a united front with Senate Republicans.

In a speech, the Senate Republican leader, Mitch McConnell of Kentucky, countered criticism from party conservatives, like many in the House, who oppose compromise with Mr. Obama.

“Anyone who belittles cooperation resigns him or herself to a state of permanent legislative gridlock,” Mr. McConnell said. “And that is simply no longer acceptable to the American people.”

Senate Republicans have not signed on to the House Republican plan that Mr. Cantor and the House minority leader, John A. Boehner of Ohio, presented to Mr. Obama. It omits the Making Work Pay tax credit, which Obama aides have called “nonnegotiable,” in favor of reducing the two lowest income-tax brackets, to 10 percent from 15 percent, and to 5 percent from 10 percent, a move that would benefit even the richest taxpayers.

Those “are not the right kinds of cuts,” said Bob Williams of the Tax Policy Center, a nonpartisan research group. “You want to put money in the hands of people who will spend it.” And the poorest Americans are “the only people we know will spend the money.”

The House Democrats’ plan calls for roughly $550 billion in spending and $275 billion in tax breaks. Republicans have said they are alarmed at the size of that package, but they have not specified what dollar amount or ratio of tax cuts to spending they prefer.

Mr. Obama is likely to have to show some deference to Republican proposals, and there already are some under discussion that could gain traction. Senator Charles E. Grassley of Iowa, the senior Republican on the Finance Committee, said Friday that he would fight to include a provision to spare at least 24 million middle-class families in 2009 from having to pay the alternative minimum tax, which applies when tax filers do not pay enough taxes to meet minimum thresholds under the traditional income tax system.

Peter Baker, Michael Falcone and Sheryl Gay Stolberg contributed reporting.

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