Stimulus: What Obama really wants
President's budget director lays out to Senate leaders what will - and won't - fly in any economic rescue package they send to the Oval Office.
NEW YORK (CNNMoney.com) -- As Senate Democrats angle for enough votes to pass an $885 billion economic recovery package, the Obama administration has laid out what it does - and doesn't - want in the final package.
"[President Obama] is insistent that the bill not include any earmarks or special projects. While many such projects may be worthy, this emergency legislation is not the proper vehicle for those aspirations," White House Budget Director Peter Orszag wrote in a letter Tuesday to leaders on Capitol Hill.
The letter went to Senate Majority Leader Harry Reid, D-Nev., Senate Minority Leader Mitch McConnell, R-Ky., and other key senators.
Republicans and some Democrats are pushing to strip the stimulus bill of measures they consider wasteful or ineffective. Sens. Ben Nelson, D-Neb., and Susan Collins, R-Maine, are working on an amendment that would slash what they call wasteful spending from the bill.
Republicans also have been pushing for stronger housing provisions. Orszag, however, urged the Senate to hold off on adding big provisions addressing the housing crisis until they see the administration's foreclosure prevention plan.
"Any major new housing provisions should be considered only after the release of the administration's comprehensive proposal," Orszag wrote.
Republicans want to introduce a provision that would encourage lenders to temporarily offer 30-year fixed rate mortgages with interest rates between 4% and 4.5%. The loans would only be available to credit-worthy homebuyers of primary residences and homeowners seeking to refinance. The Republicans said they would cap the program at $300 billion. But some say the plan could cost much more than that.
Obama and Treasury Secretary Tim Geithner are expected to announce their plan to prevent foreclosures in the "coming days," Orszag said. Democrats in the House and Senate, meanwhile, are trying to get a stimulus bill passed and sent to the White House before Presidents' Day on Feb. 16.
Orszag's letter also noted, however, that the administration supports the housing provisions currently in the stimulus bill being debated.
The biggest is an expansion of a homebuyer credit. The bill would remove the requirement that a temporary $7,500 first-time homebuyer credit be paid back over time. Republicans have called for an increase in that credit to $15,000 and, along with some key Democrats, are pushing for an expansion in eligibility so that it would apply to all homebuyers of primary residences. Such amendments are expected to garner a lot of support.
Orszag reiterated that Obama wants to see a recovery package that addresses not only near-term need but long-term economic growth.
"As we address the pressing demands of lifting the economy out of a recession, we also must look to the future and begin the process of reinvesting in priorities like clean energy, education, health care and infrastructure so that the United States can enhance its long-term growth," Orszag wrote.
Critics of the stimulus package, however, contend that much of the money in the legislation would in effect boost government spending in the long run and put considerable pressure on already record federal deficits.
"In this package, there are many new popular spending programs labeled temporary," Senate Finance Committee Ranking Member Charles Grassley, R-Iowa, said during floor debate on Tuesday. "I will challenge anyone on the other side to tell me these programs will be turned off once enacted."
Critics argue that worthy longer-term measures should be put through the normal legislative process and be subject to so-called pay-go rules, which require lawmakers to pay for the cost of a measure by either raising taxes or lowering spending elsewhere.
In his letter, Orszag said the administration wants lawmakers to minimize the long-term cost of all provisions as much as possible. "Furthermore, the president is committeed to paying for any extenion of the temporary tax cuts included in the recovery plan that he would like to make permanent."
How he plans to do that will be detailed when he submits his fiscal year 2010 budget request later this month.
But Obama hopes to have signed the stimulus bill well before that. "No plan is perfect, and we should work to make it stronger," the president said Wednesday. "But let's not make the perfect the enemy of the essential."