Obama, Democrats Reshape Tax Relief Measures in Stimulus Package

Some proposed tax relief provisions could get scrapped, while others could be added.

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Exactly one week before his swearing-in, Barack Obama visited the Capitol to lunch with Senate Democrats and sell an economic stimulus package that remains very much in flux, even as lawmakers say it could grow to between $800 billion and $850 billion.

Democrats and Obama advisers were massaging the proposal, particularly its tax relief measures, during the president-elect's second visit to the Capitol in eight days. Meeting only with Democrats on this visit, Obama sparked some complaints from Republicans that they'd seen scant details of the massive proposal intended to jump-start the troubled economy by pouring billions into federal spending and tax relief.

Obama, greeting reporters with a big wave and broad grin, made no formal remarks before or after the hourlong session. Senate Majority Leader Harry Reid of Nevada later pronounced it a "very good meeting." Talking about the stimulus, Reid said: "We're going to work with the president-elect to bring the country out of the deep hole it finds itself in."

Another key Democrat, Sen. Charles Schumer of New York, quoted Obama as saying that the stimulus package "is right on track." Schumer added: "Getting it on the desk of the president by February 13 is a very good likelihood now. There's a real feeling . . . that we're in this boat together and we ought to be rowing together."

Tax provisions are particularly in flux. According to Schumer, an Obama proposal to give employers a tax credit of $3,000 for each new hire—an "administrative nightmare," according to one leading economist—is likely to be scrapped. He said that Obama was holding fast to a campaign promise of middle-class tax relief and that the proposal to give working families a tax cut of up to $1,000 would most likely survive.

Amid what lawmakers and aides characterized as heavy-duty, behind-the-scenes negotiating, Schumer stressed that the Obama team was receptive to new ideas and noted that he'd spoken to top Obama economic adviser Larry Summers seven or eight times in the past two days.

Democrats, who gave a frosty reception to Obama's initial slate of tax-relief provisions, predicted additional tax relief in the areas of education, healthcare, and green jobs. According to a top House leadership aide, another Obama proposal that may not survive is the so-called loss carry-back provision that lets companies extend net operating losses back five years instead of the usual two.

From another House aide: "Things just keep moving, but we're getting to the end here." The two aides echoed others in saying that the package could be formally unveiled by week's end, at the earliest. If that date is missed, the package very likely will be rolled out during the middle of next week in light of Monday's federal holiday and next Tuesday's swearing-in ceremonies.

Republican senators, meantime, held their own weekly lunch—Obama has promised to visit them after he is sworn in—and complained about the dearth of details on the stimulus.

From GOP Sen. John Cornyn of Texas: "I haven't seen it yet. That's the problem, the lack of transparency. It's being negotiated by Democrats behind closed doors."

Cornyn, who chairs the National Republican Senatorial Committee, said his support would depend on what's in the package. He emphasized that he opposes pork-barrel spending that would lead to long-term growth in federal spending. Cornyn said it would be wrong to exploit a crisis to expand the size of the government and increase the burden on taxpayers.

Senate Minority Leader Mitch McConnell of Kentucky said an idea that emerged during the GOP senators' lunch today was a two-year suspension of the payroll tax. "It would put a lot of money back in the hands of businesses and in the hands of individuals," McConnell said. "Republicans, generally speaking, from Maine to Mississippi, like tax relief."