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House, Senate grapple with economic stimulus bill

WASHINGTON (CNN) -- After weeks of deadlock and amid renewed calls by President Bush to reach an agreement, House and Senate leaders hoped Thursday they could come to terms on an economic stimulus bill. But with no meetings scheduled, a quick resolution seemed unlikely.

Despite expressions of guarded optimism, no negotiating meetings had been scheduled by late afternoon, and the White House continued to express its impatience with the absence of progress.

Senate Majority Leader Tom Daschle told reporters Thursday morning there are still many deep differences to overcome before the House and Senate can come to agreement on a fiscal stimulus package. Republicans don't seem satisfied, Daschle said, with the concessions he was prepared to make.

"I'm getting to the point where I wonder if they really want economic stimulus," he said. "Every time we offer them a compromise, the answer is 'no.'"

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White House press secretary Ari Fleischer asserted Thursday afternoon that though Daschle's job running a closely divided Senate was difficult, the administration believes recovery from the terror attacks of Sept. 11, and from a newly declared recession, depends on enactment of a final version of the stimulus bill.

The Senate, he argued, stands in the way.

"In the absence of a stimulus package, there is a strong possibility, according to forecasters, that the economy will only come back with low- to moderate-growth. The president wants to see strong growth," he said.

"The president is troubled by the fact the economy has slowed down, the president is troubled that we are in recession," he continued. "The president will be more troubled if the Senate doesn't do anything about it."

Short meeting

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

The meeting, however, lasted less than an hour, with congressional leaders emerging to say there were procedural issues that must be worked out.

But Daschle, expressing a sense of exasperation Thursday, wondered if that was really the issue.

"Their primary objection is they don't want any additional money for spending on homeland defense because we had an agreement that would limit spending to $686 billion," he said. "But that was before the anthrax attack, that was before the economic slowdown, and that was before unemployment levels we haven't seen in ten years."

House Speaker Dennis Hastert told reporters Wednesday night that negotiators planned to sit back down at the bargaining table Thursday to hash out a possible compromise.

"We agreed that we're going to work on procedure... we're going to try to sit down and work out a framework, we'll meet tomorrow," said Hastert, R-Illinois. "We didn't want to get into the policy side before we had a procedure worked out."

Ordinarily, House and Senate leaders would operate under 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.

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

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.

Daschle said he told Bush at a Wednesday breakfast meeting 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 try 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.

"The most important piece of this package is unemployment and health benefits for unemployed workers," Daschle said Thursday. "Nothing more important."

Daschle said earlier he would be willing to entertain the idea proposed by Senate Republicans on Tuesday for a month-long Social Security payroll tax holiday.

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.

But House Majority Leader Dick Armey told reporters Wednesday that the payroll tax holiday would not be a priority for House Republicans.

"That is not a good growth part of the package," Armey, R-Texas, 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."

Further divides

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."

-- CNN's Jonathan Karl, Dana Bash, Kate Snow and Ian Christopher McCaleb contributed to this report.


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