Road to stimulus: Speed bumps ahead

Congressional Democrats want to have a bill ready for Obama on Jan. 20. But that might be overly optimistic. Get ready for the billion-dollar debate.

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By Jeanne Sahadi, CNNMoney.com senior writer

What was the biggest business news story of 2008?
  • Auto industry meltdown
  • Bailout of Wall Street
  • Foreclosure storm
  • Oil price's wild ride
  • Stock market meltdown
  • It's official: U.S. in recession

NEW YORK (CNNMoney.com) -- Democratic lawmakers want to pass a far-reaching bill to save the economy by Inauguration Day on Jan. 20.

That's the goal.

But the reality may be a little different. Enactment of an economic stimulus bill could be pushed into late January or early February, said Dan Clifton, a Washington-based analyst with the investment research firm Strategas Research Partners.

The reason: The measure will be big and complex - exceeding $700 billion by some estimates. And getting buy-in from lawmakers angered about the mounting toll of government rescues might take more time than expected.

Leading Republicans, who agree something needs to be done to help the economy, are nevertheless calling a "Whoa there." They say they want time to review any Democratic proposal, which leading lawmakers are still hammering out in the House and Senate.

"The American people should have at least a week to review what will likely be the largest Washington spending bill of all time. ... We must take great care to ensure that fraud and other misuse of taxpayers' funds don't result from such a large spending bill," said Senate Minority Leader Mitch McConnell, R-Ky., on Monday.

McConnell and House Minority Leader of John Boehner, R-Ohio, have called for Congress to hold hearings on the bill.

Each party has a legitimate argument, Clifton said. "The Republicans don't want to be forced to vote on something so large and not know what's in it. The Democrats are saying we should have done this three months ago and the longer we wait, the worse it gets."

Since it doesn't behoove the Democrats or the Obama administration to push through a massive bill with only minimal Republican support -- Clifton thinks Senate Democrats won't have trouble finding enough moderate Republicans to vote for the package -- it's likely the Democrats will include measures that sweeten the deal for Republicans.

In particular, he thinks they could include an expansion of a key business tax break known as the net operating loss carryback, a provision that allows companies to apply their current losses to past and future tax bills to reduce their tax liability.

Other events could also slow down passage, Clifton said. Key among them: the Congressional Budget Office's annual Budget and Economic Outlook. The report, due out soon, will portray in black and white the country's estimated deficit -- which many say could approach $1 trillion before counting any stimulus measures.

Breaking up the bill

There is a chance a stimulus bill will be passed by Jan. 20, but it might be the first of two pieces of legislation.

"The first will be stimulus measures intended to get folks back to work and to help with housing. Then a broader measure will advance that will include more public works projects and related measures," said Jaret Seiberg, a financial services analyst at the Stanford Group, a Washington-based policy research firm.

Democratic negotiators in the House and Senate are working on proposals that they will present to their chambers after the new Congress convenes on Jan. 6.

No matter how long it takes for a stimulus package to pass, there is likely to be a lot of political theatre and face-saving in the process, Seiberg suggested.

"These debates typically play out with the party in charge seeking far more than it wants. Then it drops demands and both sides declare victory with a compromise. We expect this battle to play out that way as well." To top of page

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