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Obama's Economic Stimulus Plan Passes Lower House

Obama has asked legislators to look past partisan divides in approving the measures
(RFE/RL) -- President Barack Obama has won the first legislative victory of his presidency, with his massive plan to revive the U.S. economy winning passage in the House of Representatives.

The $819 billion stimulus bill passed by a vote of 244-188, which ran straight down party lines: not one House Republican voted "yes." It now goes to the Senate, where a companion bill is already being drafted.

Democratic leaders have vowed that the legislation will be ready for Obama's signature by mid-February.

Earlier in the day, Obama continued to try and win over Republican votes. After meeting with business leaders at the White House, he said the stimulus plan contains measures to create or save as many as 4 million jobs, as well as long-term investments for sustained growth.

"Even as this plan puts Americans back to work, it will also make critical investments in alternative energy and safer roads, better health care and modern schools that will lay the foundation for long-term growth and prosperity," Obama said.

Obama said he understood that there is skepticism about the size of the stimulus package, which is why he has included in it "unprecedented measures" that will allow the American people to hold his administration accountable. Among those measures is a website through which Americans can follow how the money is spent.

On the night of January 28, Obama invited members of the opposition and their spouses, as well as members of his own party, to the White House for a cocktail party, where he continued to make his case for the package, albeit in a less formal atmosphere.

Tax Cuts, Infrastructure, Education

The debate in Congress comes as evidence mounts of the depth of the U.S. recession.

Figures due later this week are expected to show that GDP shrank by more than 5 percent in the last quarter of 2008.

On January 26, several large U.S. companies announced they were cutting tens of thousands of jobs.

Obama's package contains some $275 billion in temporary tax cuts for individuals and businesses, and $550 billion in spending.

That money is a mix of spending on infrastructure, like the nation's energy grid, roads and railways, as well as extra help for those affected by the downturn.

It also includes some $150 billion earmarked for education -- a massive injection "The New York Times" called the biggest increase in federal aid since the end of World War II.

Backers say the package will create some 3 million jobs, boost consumer spending, and get the economy moving again.

Obama also said it's just the start of what is likely to be a long effort to revive the economy. Other measures needed, he said, include dealing with banks' troubled assets, getting lending flowing, and improving financial industry regulation.

Republican lawmakers question whether it really will create all those jobs and say it includes too much spending and not enough tax cuts.

Republican Representative Mike Pence said after meeting Obama that "the only thing it will stimulate is more government and more debt. And the president heard that message today."

Obama says he's listening to Republican concerns and ready to consider some changes. But he's also appealing for everyone, as he puts it, to "put politics aside."

And with Democrats enjoying majorities in both houses, the bill is likely to pass regardless which way Republicans vote.

Next Challenge

A vote in the Senate looks likely next week on a slightly different bill. The next task will be to work out those differences and have one bill ready for Obama to sign, perhaps by the middle of next month.

Analysts say the spending on infrastructure like roads and bridges is likely to boost the economy, though it might take some time.

But there are greater doubts about the tax relief meant to encourage spending in the short-term. Economist Jonathan Loynes, at the Capital Economics consultancy in London, says that's because people and businesses might choose to save the money instead.

"There are always doubts over just how effective a fiscal stimulus will be when people know that eventually they're going to have to pay for it," Loynes said. "We know that government debt is rising rapidly across all the major economies, and that at some point we're going to need a major fiscal consolidation, in other words tax increases to pay for all this. So if households and companies are aware of that then it might make them cautious about spending it now. They might decide to hoard it for a rainy day, when a new government comes along in the not-too-distant future and asks them for that money back."

Even without the new spending, the U.S. budget deficit is expected to reach $1.2 trillion this fiscal year.

That's something Obama says he is keenly aware of as he tries to pull the country out of a recession.

"Nobody is more worried about the deficit and the debt than me," he told Republicans on January 27. "I will be judged by the legacy I have left behind."

With material from agency reports.