Senate passes $787 billion stimulus bill

A whiff of deflation

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NEW YORK (CNNMoney.com) -- It's a done deal. Still controversial, but a done deal.

The Senate on Friday evening passed the $787 billion American Recovery and Reinvestment Act of 2009, which was drawn up, amended and negotiated in record time.

The bill got 60 votes -- the minimum it needed to pass. Three Republicans -- Sens. Susan Collins, R-Me., Arlen Specter, R-Pa., and Olympia Snowe, R-Me. -- voted for it. Earlier in the day, no Republicans in the House voted for the legislation, which nevertheless passed 246 to 183, with just 7 Democrats voting against it.

President Barack Obama will sign the recently approved economic stimulus bill on Tuesday in Denver, Colorado, two senior administration officials told CNN.

Both officials cited a desire of Obama's to get out of Washington -- to go, in the words of one official, "out west in an area hit hard economically, away from the politics of Washington." The other official described Denver as "a place that will see the benefits of the bill in hiring workers."

"The goal at the heart of this plan is to create jobs. Not just any jobs, but jobs doing the work America needs done: repairing our infrastructure, modernizing our schools and hospitals, and promoting the clean, alternative energy sources that will help us finally declare independence from foreign oil," President Obama said Friday morning.

The Obama economic team estimates the stimulus plan will create or save between 3 million and 4 million jobs.

"We've done something today that's transformational for the nation," said House Speaker Nancy Pelosi, D-Calif., in a press conference after the House vote.

During the House floor debate earlier on Friday, House Appropriations Committee Chairman David Obey, D-Wisc., characterized the bill as "the largest change in domestic policy since the 1930s."

The bill's final passage would represent far less than the bipartisan victory Obama had hoped for weeks ago, a hope he tabled as it became clear that Republicans and some fiscally conservative Democrats were adamantly opposed to the size and contents of the bill.

Republican critics believe there are more targeted and effective ways to create jobs than the measures in the bill, including more spending on infrastructure and more tax relief.

They frequently cite the tag line to describe what Democrats have often said makes stimulus measures effective -- that they be timely, targeted and temporary. "This bill fails on all three points," Senate Minority Leader Mitch McConnell, R-Ky., said Friday.

In the House, Rep. Mike Pence, R-Ind., blasted the bill as misguided.

"Republicans are not about saying 'No' but about saying 'Yes' to solutions that put Americans back to work," Pence said. "[This legislation] will not grow our economy. It will grow our government."

And they frequently cite the burden of such an expensive package on the country's record high deficit and the burden that will place on the next generation.

In response to Republican critics, Sen. Dick Durbin, D-Ill., cited provisions in it that will help families facing job loss, education expenses and mortgage troubles.

"Consider the impact on the next generation if their parents lose a job ... if their home is foreclosed upon ... if they're forced out of college because their parents can't pay the bills," Durbin said.

Democrats have also countered the Republicans' debt argument by noting that record deficit levels were achieved as a result of borrowing to pay for the cost of the Iraq war and to finance a series of tax cuts -- both decisions made during a Republican administration.

The compromise bill was crafted after intensive negotiations in recent days between the House, Senate and White House, although Republicans said repeatedly they felt excluded from the process. And on Friday, several said they did not think it was fair that they were being asked to vote on a 1,000-page-plus bill that was posted online only late Thursday night.

The package devotes $308.3 billion -- or 39% -- to appropriations spending, according to the Congressional Budget Office. That includes $120 billion on infrastructure and science and more than $30 billion on energy-related infrastructure projects, according to key congressional committees.

It devotes another $267 billion -- or 34% -- on direct spending, including increased unemployment benefits and food stamps, CBO said.

And it provides $212 billion -- or 27% -- for tax breaks for individuals and businesses, although the biggest piece of that is for individuals. (Here's a quick breakdown of those breaks.)

Depending on how tax measures are categorized, the percentage of the bill devoted to tax relief is 35%, according to the Joint Committee on Taxation.

Unlike the CBO, the committee counts all portions of tax credits that are refundable. A refundable credit is one that may be paid to tax filers even if the credit exceeds a tax filer's liability. In other words, it is money the government needs to spend. The CBO, by contrast, treats that money as an outlay.

Republicans have advocated for more tax relief in the bill -- they wanted at least 40% -- and they often oppose tax credits going to those who pay less in income tax than they receive in refunds.

Democrats counter that the lowest-income families do pay money into the system by way of payroll tax for Social Security and through sales taxes. And they note that it is those low-income families most likely to quickly spend any tax relief they get, thereby making it more stimulative for the economy.

For months, economists -- both liberal and conservative -- have urged lawmakers to act quickly to help stem the economic downturn. They argue that while tax cuts can be put out more quickly than infrastructure spending, they may not be as stimulative as spending because tax filers are likely to save at least a portion of what they receive.

There also has been debate over how large the total package should be. Many economists think it should be larger -- to help combat what is expected to be a $2 trillion shortfall in the country's output this year and next. But at this point, though they're not enamored with every provision in the bill -- they say it's necessary to do something.

Proponents of the bill aren't promising the economic recovery package will be a panacea for the economy. "No one thinks this is the answer," said House Majority Whip Steny Hoyer, D-Md.

But, they say, it's needed to stem the downturn and ease the financial strains hurting Americans. Indeed, Obama's economic team last month said they expect that the unemployment rate likely will go up in the near term but having a stimulus package could bring it down to around 7% by the end of 2010. That's slightly below the rate of 7.6% today.

- CNN's Ted Barrett and CNNMoney.com's David Goldman contributed to this report.