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Wall Street Journal: Stimulus Deal May Be Possible

By Sarah Lueck and Michael M. Phillips

WASHINGTON -- A top House Democrat said Congress and the White House can come to an agreement on an economic-stimulus package -- provided Republicans don't insist the plan includes making President Bush's signature tax cuts permanent.

Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee, suggested lawmakers and administration officials, particularly Treasury Secretary Henry Paulson, have begun to find common ground on a plan to spur the nation's economic growth. With concerns growing that the economy might slip into recession, House Speaker Nancy Pelosi (D., Calif.) met this week with Federal Reserve Chairman Ben Bernanke, who supports doing something to counter the fallout from the meltdown in the subprime mortgage market, according to Mr. Frank.

'I think we could make a deal if you look at what Bernanke and Paulson have been talking about; that is, people have to set aside their longer-term ideological agendas,' Mr. Frank said in an interview. He predicted a stimulus plan would ultimately cost more than $100 billion.

The delicate negotiations have only just begun. President Bush, traveling in the Middle East, hasn't weighed in. The Senate, where passing legislation is trickiest, doesn't return to work until next week.

So far, Democrats are showing a keen interest in a bipartisan solution. Ms. Pelosi asked to meet today with the two top House Republicans, John Boehner and Roy Blunt. She spoke by phone with Mr. Paulson, who also has been contacting Republican lawmakers and is expected to meet next week with Senate Republicans on the economy.

Looming over the talks is the question of whether Mr. Bush has enough political muscle to persuade Republicans to deal with Democrats. The president's approval ratings are low, and Republican lawmakers may see more benefit in drawing distinctions with Democrats in an election year, rather than going along with them.

Still, both parties are under pressure to respond to voters' fears about their mortgages, jobs and pocketbooks. Mr. Frank said he expects an accord to include 'some tax relief right away to people who are going to spend a lot of money' and 'some alleviation of the plight of people who would be worst hurt,' such as expanded unemployment insurance and food stamps.

Some Democrats also are pushing for heating assistance for low-income people and accelerated spending on public-works projects. Republicans want tax breaks for business; top on the White House list are tax rebates for individuals and rules that would allow companies to deduct the cost of new equipment more rapidly.

'There are some things that are pretty clear cut,' Mr. Frank said. 'That they put aside the long term -- making the tax cuts permanent -- and talk about getting the money out.'

Yesterday, the National Retail Federation, whose members had a dismal Christmas season, called for legislation to spur the economy. 'Stimulus that helps consumer spending will benefit all industries in the private sector,' said Tracy Mullin, president of the group, which encompasses more than 100 retail associations.

White House spokesman Tony Fratto declined to say whether the president is willing to postpone debate over extending his cuts in personal income-tax rates, estate taxes and other taxes, which are scheduled to expire in 2010. 'I'm not going to get into what may or may not be in a possible proposal, but regardless, it's a priority of the administration and the Republicans to make those tax cuts permanent,' Mr. Fratto said.

Still, he said that 'should the president decide to go forward with new economic-growth policies, there's no reason why we couldn't find bipartisan support.'

It appears increasingly likely that to get a deal with Republicans, Democrats will have to depart from their pay-as-you-go budget rule, which requires new tax cuts and spending on entitlement programs to be offset by equal revenue. Otherwise, it would be difficult, and maybe impossible, to get a bill through the Senate and signed by Mr. Bush.

Separately yesterday, the nonpartisan Congressional Budget Office issued a report warning that many of the stimulus proposals being floated in Washington would have only limited effect on the economy because they would be too slow to take hold or cost too much in relation to the economic boost they would provide. The quickest and most efficient way to get money into the hands of consumers likely to spend the extra cash, the CBO said, would be extending or expanding unemployment-insurance benefits or increasing food-stamp benefits.

'Most of the stimulus options under discussion would be difficult to actually get out the door in the first half of 2008,' CBO Director Peter Orszag said in an interview. The CBO said allowing companies to speed tax write-offs for new equipment would provide only a limited boost to the economy in the immediate future.

Even a tax rebate, such as the $300 to $600 checks sent to taxpayers during the slowdown early in the Bush administration, would take months to organize, the report said. The CBO also cast doubt on the effectiveness of an approach favored by some Democrats, a quick increase in spending on bridges, roads and other infrastructure. 'Even those that are 'on the shelf' generally cannot be undertaken quickly enough to provide timely stimulus to the economy,' the report said.