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Glimmers of progress on stimulus bill

By Dana Bash and Kate Snow
CNN Washington Bureau

WASHINGTON (CNN) -- After weeks of deadlock and amid renewed calls by President Bush to reach an agreement, House and Senate leaders said they will keep trying Thursday to come to terms on an economic stimulus bill.

There were some glimmers of progress on Wednesday, when congressional leaders met briefly after Senate Democrats dropped demands that a spending package for homeland security be part of the economic stimulus bill. Republicans had refused to negotiate if Democrats insisted on including more spending in the bill.

But the meeting lasted less than an hour, with congressional leaders emerging to say there were procedural issues that must be worked out before talks can begin on the substantive differences between the parties.

"We agreed that we're going to work on procedure... we have some procedural questions, we're going to try to sit down and work out a framework, we'll meet tomorrow," said House Speaker Dennis Hastert, R-Illinois. "We didn't want to get into the policy side before we had a procedure worked out; we hope that we have positive news tomorrow [Thursday]."

Message Board: Bush presidency 

Ordinarily, House and Senate leaders would operate under rules of House-Senate conference rules. But since the Senate has yet to pass its version of the bill, negotiators must work out a process for the negotiations.

Senate Finance Chairman Max Baucus, D-Montana, said he was sure once the procedural issues were worked out, negotiators would be able to come up with a compromise.

The meeting was the first for congressional leaders from both sides on the issue. Treasury Secretary Paul O'Neill also attended the meeting.

President Bush has been urging Congress "to get the job done," and pass the stimulus package. He told a farmers group Wednesday that 415,000 Americans have lost their jobs since he asked Congress in early October to approve a package. "Further delay could put more Americans and more families at risk," Bush said.

Senate Majority Leader Tom Daschle, D-South Dakota, said he told Bush at a Wednesday breakfast meeting with congressional leaders that Democrats would still push for their homeland security proposal -- including money for increased port and railroad security and bioterrorism programs for hospitals -- but will push to include the spending in a larger defense spending bill. Daschle also said they would cut their proposal in half -- from $15 billion to $7.5 billion.

Daschle said he offered this as a "way to move the process forward" and hopes this will "free up the balance of the bill to negotiate" on tax cuts and relief for unemployed workers, issues where both sides remain bitterly divided on the details.

Wednesday morning, before news of the meeting emerged, House Majority Leader Dick Armey, R-Texas, criticized Daschle for taking so long to finish a bill.

"This country, at this time, when our needs are so great, will not tolerate a do-nothing Senate. And he needs to get that message," Armey said.

But he also suggested that perhaps it would be best for Congress not to pass any economic stimulus bill at all this year.

"Doing the wrong thing is worse than doing nothing," said Armey. "And Senator Daschle seems to be committed to doing nothing, unless he can get others to agree to do the wrong thing."

House Minority Leader Dick Gephardt, D.-Missouri, said he disagreed with that notion that Congress might be better off doing nothing.

"A lot of the economy is psychological perception," Gephardt said. "And we have created the perception this bill was going to happen. If we now withdraw it because we can't get a huge tax break for corporate America in it, we're going to really cause problems in this economy."

Democratic leaders also said an economic stimulus package is needed to provide assistance to unemployed and uninsured workers. Gephardt said he would "not be willing to leave this building for the holidays until we get that done."

But, in private, several Democratic aides said that if the economic stimulus package were to die, Republicans, not Democrats, would get the blame since Americans see the GOP as being in charge.

As for what the economic stimulus bill might include, Daschle said he was willing to entertain the idea proposed by Senate Republicans Tuesday for a month-long payroll tax holiday, but not in place of rebate checks to low-income workers who did not get them in the fall because they do not pay income tax.

The Democratic leader said he would support a $38 billion payroll tax holiday in place of the GOP proposal to reduce the 28 percent tax bracket to 25 percent.

Armey told reporters the payroll tax holiday would not be a priority for House Republicans.

"That is not a good growth part of the package," Armey said. "I prioritized all the recommendations we had in terms of potential to create growth... and that was way down the list. When you've got better priorities, you should enact better priorities."

The two sides are also divided over the corporate alternative minimum tax that ensures every company pays at least some income tax. The AMT was passed in 1986 as part of President Reagan's sweeping tax reform.

Senate Republicans would repeal the AMT, while House Republicans favor repealing the AMT and refunding billions of dollars that companies paid.

Democrats are opposed to any corporate AMT repeal, calling it a gift to big business.

Daschle said it was his intention to move both the economic stimulus bill and the homeland defense spending simultaneously. He did not rule out dropping any deal that may emerge on economic stimulus if Republicans held up Democrats' homeland security spending proposal.

The Democrats' strategy is to put their measure to fund infrastructure projects on the defense spending bill in order to force the president into the uneasy position of having to veto a measure funding the military at a time of war.

The Senate Appropriations Committee will consider the defense spending bill next week. Democrats believe they have the votes to pass their $7.5 billion spending proposal for homeland security in committee.

Bush has promised to veto any extra spending beyond what he and congressional leaders have already agreed to, and has said he will ask for more money for homeland security next spring.

Daschle told CNN that the president reiterated his threat to veto excess government spending, but said he told the president if he "wanted to veto the defense bill, go ahead."


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