Washington President Barack Obama’s plea for more stimulus spending as insurance against a double-dip recession hit a roadblock in the Senate on Wednesday, the victim of election-year anxiety over huge federal deficits.
A dozen Democrats joined Republicans on a key 52-45 test vote rejecting an Obama-endorsed, $140 billion package of unemployment benefits, aid to states, business and family tax breaks and Medicare payments for doctors because it would swell the federal debt by $80 billion.
The swing toward frugality runs counter to the advice of economists who support the bill’s funding for additional jobless benefits and help to states to avoid layoffs of public service jobs. They fear that the economy could slip back into recession just as it’s emerging from the biggest economic downturn since the Great Depression.
Federal Reserve Chairman Ben Bernanke warned last week that while lawmakers need to come up with a plan for tackling the nation’s long-term deficit crisis, the U.S. recovery is still fragile. It’s too early for large, immediate spending cuts, Bernanke said.
“We’ve got to do more to build on the existing jobs momentum and that’s what these targeted measures are about,” said White House economist Jared Bernstein.
The Senate earlier passed another version with even bigger deficits. But that was before tea party-backed candidates running on anti-deficit, anti-big government platforms began knocking off more established politicians in spring primaries.
Despite the loss, Democratic leaders predicted serenely that a scaled-back version of the measure — extending unemployment benefits for the long-term jobless and providing $24 billion in aid to the states — could pass, possibly as early as later this week, after relatively minor revisions.
“We need to change a few things,” said Majority Leader Harry Reid, D-Nev.
Later Wednesday, Finance Committee Chairman Max Baucus, D-Mont., unveiled a new, slimmer version of the bill that he predicted would “provide a path forward.”
But Republicans cautioned that the margin of Wednesday’s vote was a bad sign for a bill that, even after revisions, would still likely add more than $50 billion to deficits over the next decade. Democrats would need 60 votes, 15 more than they got Wednesday, to prevent Republicans from blocking the bill.
“All I can tell you is that consensus about borrowing, debt, spending is growing stronger in our caucus and I think it is in the Democrats’ as well,” said Sen. John Thune, R-S.D.
Obama renewed his push for the measure last weekend, warning that “hundreds of thousands” of state and local government jobs could be lost without $24 billion in Medicaid money to help states balance their budgets and $23 billion more to prevent layoffs at local school districts around the country.
The new version released Wednesday afternoon would roll back last year’s $25-a-week increase in unemployment checks and give doctors just a six-month reprieve from scheduled cuts in their Medicare payments instead of relief through 2011.