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WORLD> America
Obama economic plan now tops $900 billion
(Agencies)
Updated: 2009-02-04 19:01

WASHINGTON -- The cost of President Barack Obama's economic recovery plan is now above $900 billion after the Senate added money for medical research and tax breaks for car purchases.

US President Barack Obama is pictured as he talks to second grade students at the Capital City Public Charter School (Lower School) in Washington February 3, 2009. The cost of President Barack Obama's economic recovery plan is now above $900 billion after the Senate added money for medical research and tax breaks for car purchases. [Agencies] 

It could go higher Wednesday if a tax break for homebuyers is made more generous, even as centrists in both parties promise to clear away spending items that won't jump-start the economy right away.

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In an interview on CNN, Obama signaled a willingness to drop items that "may not really stimulate the economy right now." He also signaled he'll try to remove "buy American" provisions in the legislation to avoid a possible trade war.

In a victory for auto manufacturers and dealers, Sen. Barbara Mikulski, D-Md., won a 71-26 vote to allow most car buyers to claim an income tax deduction for sales taxes paid on new autos and interest payments on car loans. The break would cost $11 billion over the coming decade but could mean savings of $1,500 on a $25,000 car.

"Just as we need to get the housing market going, we need to get auto sales going," said Sen. Debbie Stabenow, D-Mich.

Wednesday's session could produce even more generous savings for homebuyers.

Sen. Johnny Isakson, R-Ga., is pressing for a tax credit of up to $15,000 for everyone who buys a home this year, at a cost of $18.5 billion. The pending measure would award a $7,500 tax credit only to first-time homebuyers.

At the same time, centrist senators, including Ben Nelson, D-Neb., and Susan Collins, R-Maine, are seeking to cut tens of billions of dollars from the legislation. They're operating with the blessing of Democratic leaders, who hope a successful effort could attract some GOP votes for Obama's plan.

Democratic leaders conceded they may soon be obliged to cut billions of dollars from the measure. "It goes without saying if it's going to pass in the Senate, it has to be bipartisan," said Sen. Dick Durbin of Illinois, the second-ranking Democratic leader, adding that rank-and-file lawmakers in both parties want to reduce the cost of the bill.

In a series of skirmishes Tuesday, the Senate turned back a proposal to add $25 billion for public works projects and voted to remove a $246 million tax break for movie producers. Both moves were engineered by Republicans who are critical of the bill's size and voice skepticism of its ability to create jobs.

But several hours later, GOP conservatives didn't contest approval of a $6.5 billion increase in research funding for the politically popular National Institutes of Health. That amendment, by Tom Harkin, D-Iowa, drove the price tag of Obama's plan just above $900 billion.

Democratic leaders have pledged to have the bill ready for Obama's signature by mid-month, and in a round of network television interviews Tuesday, the president underscored the urgency. He told CNN that even three months ago, most economists would not have predicted the economy was "in as bad of a situation as we are in right now."

He also spoke out against efforts to require the use of domestic steel in construction projects envisioned in the bill, telling Fox News, "We can't send a protectionist message."

Mikulski's office put the cost of the automobile tax break she sponsored at $11 billion over 10 years. It would apply to the first $49,500 in the price of a new car purchased between last Nov. 12 and Dec. 31, 2009. Individuals with incomes of up to $125,000 and couples earnings as much as $250,000 could qualify, including those who do not itemize their deductions.

Republicans are expected to seek a vote later in the week on a plan to inject the government into the mortgage industry in an attempt to drive down interest rates on mortgages to as low as 4 percent. Democrats treaded carefully on the proposal, saying they would consider it but also claiming the $300 billion Republicans allocated would not come close to accommodating the demand.

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